Shareholders Of Münchener Rückversicherungs-Gesellschaft in München (ETR:MUV2) Must Be Happy With Their 67% Return

The simplest way to invest in stocks is to buy exchange traded funds. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München (ETR:MUV2) share price is up 33% in the last five years, slightly above the market return. Zooming in, the stock is actually down 16% in the last year.

Check out our latest analysis for Münchener Rückversicherungs-Gesellschaft in München

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Münchener Rückversicherungs-Gesellschaft in München's earnings per share are down 14% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In fact, the dividend has increased over time, which is a positive. Maybe dividend investors have helped support the share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Münchener Rückversicherungs-Gesellschaft in München is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Münchener Rückversicherungs-Gesellschaft in München the TSR over the last 5 years was 67%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Münchener Rückversicherungs-Gesellschaft in München shareholders are down 12% for the year (even including dividends), but the market itself is up 9.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Münchener Rückversicherungs-Gesellschaft in München better, we need to consider many other factors. Even so, be aware that Münchener Rückversicherungs-Gesellschaft in München is showing 2 warning signs in our investment analysis , you should know about...

But note: Münchener Rückversicherungs-Gesellschaft in München may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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