AIXTRON's (ETR:AIXA) 24% CAGR outpaced the company's earnings growth over the same five-year period

AIXTRON SE (ETR:AIXA) shareholders might be concerned after seeing the share price drop 12% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. We think most investors would be happy with the 176% return, over that period. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 27% decline over the last twelve months.

Since it's been a strong week for AIXTRON shareholders, let's have a look at trend of the longer term fundamentals.

Check out our latest analysis for AIXTRON

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 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).

During five years of share price growth, AIXTRON achieved compound earnings per share (EPS) growth of 29% per year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that AIXTRON has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on AIXTRON's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for AIXTRON the TSR over the last 5 years was 189%, 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

While the broader market gained around 7.5% in the last year, AIXTRON shareholders lost 25% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 24% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand AIXTRON better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with AIXTRON (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.