Stock Analysis

Vonovia (ETR:VNA) Has Gifted Shareholders With A Fantastic 114% Total Return On Their Investment

XTRA:VNA
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When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Vonovia SE (ETR:VNA) share price is up 84% in the last 5 years, clearly besting the market return of around 25% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12% , including dividends .

Check out our latest analysis for Vonovia

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Vonovia achieved compound earnings per share (EPS) growth of 35% per year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 9.65 also suggests market apprehension.

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

earnings-per-share-growth
XTRA:VNA Earnings Per Share Growth March 2nd 2021

We know that Vonovia has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Vonovia will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Vonovia, it has a TSR of 114% 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

Vonovia shareholders are up 12% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 16% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Vonovia better, we need to consider many other factors. Take risks, for example - Vonovia has 5 warning signs (and 2 which are concerning) we think you should know about.

Of course Vonovia 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.

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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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