If You Had Bought Deutsche Balaton (FRA:BBHK) Stock Five Years Ago, You Could Pocket A 94% Gain Today

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term Deutsche Balaton AG (FRA:BBHK) shareholders have enjoyed a 94% share price rise over the last half decade, well in excess of the market return of around 11% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 28%.

View our latest analysis for Deutsche Balaton

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Deutsche Balaton moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Deutsche Balaton share price has gained 21% in three years. In the same period, EPS is up 6.8% per year. This EPS growth is remarkably close to the 7% average annual increase in the share price (over three years, again). That suggests that the market sentiment around the company hasn't changed much over that time. There's a strong correlation between the share price and EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Deutsche Balaton's key metrics by checking this interactive graph of Deutsche Balaton's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Deutsche Balaton shareholders have received a total shareholder return of 28% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Deutsche Balaton you might want to consider these 3 valuation metrics.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. 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.
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