Pulling back 3.1% this week, DWS Group GmbH KGaA's ETR:DWS) three-year decline in earnings may be coming into investors focus

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the DWS Group GmbH & Co. KGaA (ETR:DWS) share price is up 94% in the last three years, clearly besting the market return of around 36% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 59%, including dividends.

Although DWS Group GmbH KGaA has shed €340m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the last three years, DWS Group GmbH KGaA failed to grow earnings per share, which fell 1.2% (annualized).

Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don't think EPS is the most important metric for DWS Group GmbH KGaA at the moment. So other metrics may hold the key to understanding what is influencing investors.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

DWS Group GmbH KGaA is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think DWS Group GmbH KGaA will earn in the future (free analyst consensus estimates)

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for DWS Group GmbH KGaA the TSR over the last 3 years was 154%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that DWS Group GmbH KGaA shareholders have received a total shareholder return of 59% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Importantly, we haven't analysed DWS Group GmbH KGaA's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

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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.