Nexus' (ETR:NXU) five-year total shareholder returns outpace the underlying earnings growth

It hasn't been the best quarter for Nexus AG (ETR:NXU) shareholders, since the share price has fallen 12% in that time. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 116% return, over that period. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 17% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 7.0%, let's check if the fundamentals match the share price.

Check out our latest analysis for Nexus

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. 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 five years of share price growth, Nexus achieved compound earnings per share (EPS) growth of 16% per year. So the EPS growth rate is rather close to the annualized share price gain of 17% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Nexus has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Nexus' TSR for the last 5 years was 120%, 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

Nexus shareholders are down 17% for the year (even including dividends), but the market itself is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before forming an opinion on Nexus you might want to consider these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.