Siemens Healthineers (ETR:SHL) jumps 4.4% this week, though earnings growth is still tracking behind five-year shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Siemens Healthineers AG (ETR:SHL) shareholders have enjoyed a 26% share price rise over the last half decade, well in excess of the market decline of around 7.4% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.4% in the last year , including dividends .

The past week has proven to be lucrative for Siemens Healthineers investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Siemens Healthineers

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, Siemens Healthineers achieved compound earnings per share (EPS) growth of 2.0% per year. This EPS growth is slower than the share price growth of 5% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. In the case of Siemens Healthineers, it has a TSR of 38% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Siemens Healthineers shareholders are up 1.4% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 7% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Siemens Healthineers better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Siemens Healthineers (of which 1 doesn't sit too well with us!) you should know about.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.