Does Talanx’s (ETR:TLX) Share Price Gain of 40% Match Its Business Performance?

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Talanx share price has climbed 40% in five years, easily topping the market return of 13% (ignoring dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 2.0% in the last year, including dividends.

View our latest analysis for Talanx

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Over half a decade, Talanx managed to grow its earnings per share at 3.5% a year. This EPS growth is lower than the 6.9% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

XTRA:TLX Past and Future Earnings, March 19th 2019
XTRA:TLX Past and Future Earnings, March 19th 2019

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Talanx’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Talanx the TSR over the last 5 years was 73%, 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 good to see that Talanx has rewarded shareholders with a total shareholder return of 2.0% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 12% 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. Keeping this in mind, a solid next step might be to take a look at Talanx’s dividend track record. This free interactive graph is a great place to start.

But note: Talanx 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.

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 editorial-team@simplywallst.com. 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.