Investors more bullish on DWS Group GmbH KGaA (ETR:DWS) this week as stock ascends 4.2%, despite earnings trending downwards over past year

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the DWS Group GmbH & Co. KGaA (ETR:DWS) share price is up 36% in the last 1 year, clearly besting the market return of around 2.2% (not including dividends). That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 9.8% in three years.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for DWS Group GmbH KGaA

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last twelve months, DWS Group GmbH KGaA actually shrank its EPS by 7.1%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

For starters, we suspect the share price has been buoyed by the dividend, which was increased during the year. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

DWS Group GmbH KGaA is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, DWS Group GmbH KGaA's TSR for the last 1 year was 45%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that DWS Group GmbH KGaA shareholders have received a total shareholder return of 45% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand DWS Group GmbH KGaA better, we need to consider many other factors. Take risks, for example - DWS Group GmbH KGaA has 1 warning sign we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.