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Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Talanx share price has climbed 36% in five years, easily topping the market return of 12% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 0.6% in the last year.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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 five years of share price growth, Talanx actually saw its EPS drop 0.8% per year. By glancing at these numbers, we’d posit that the decline in earnings per share is not representative of how the business has changed over the years. 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 revenue growth of about 4.4% per year might also encourage buyers.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Balance sheet strength is crucual. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Talanx, it has a TSR of 62% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s nice to see that Talanx shareholders have received a total shareholder return of 0.6% over the last year. That’s including the dividend. Having said that, the five-year TSR of 10% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on Talanx you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course Talanx 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 DE exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.