Schwälbchen Molkerei Jakob Berz's (FRA:SMB) 11% CAGR outpaced the company's earnings growth over the same five-year period

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the Schwälbchen Molkerei Jakob Berz AG (FRA:SMB) share price is up 63% in the last 5 years, clearly besting the market return of around 6.2% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year, including dividends.

Since the stock has added €6.5m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Schwälbchen Molkerei Jakob Berz

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the last half decade, Schwälbchen Molkerei Jakob Berz became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

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

This free interactive report on Schwälbchen Molkerei Jakob Berz's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 Schwälbchen Molkerei Jakob Berz the TSR over the last 5 years was 71%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Schwälbchen Molkerei Jakob Berz shareholders have received a total shareholder return of 29% over the last year. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Schwälbchen Molkerei Jakob Berz better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Schwälbchen Molkerei Jakob Berz you should be aware of, and 1 of them doesn't sit too well with us.

Of course Schwälbchen Molkerei Jakob Berz may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.