DATAGROUP (ETR:D6H) stock performs better than its underlying earnings growth over last five years

DATAGROUP SE (ETR:D6H) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. It has returned a market beating 44% in that time.

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

Check out our latest analysis for DATAGROUP

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, DATAGROUP managed to grow its earnings per share at 16% a year. This EPS growth is higher than the 8% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

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

It is of course excellent to see how DATAGROUP has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at DATAGROUP's financial health with this free report on its balance sheet.

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 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. As it happens, DATAGROUP's TSR for the last 5 years was 52%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in DATAGROUP had a tough year, with a total loss of 9.3% (including dividends), against a market gain of about 21%. 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 9%, 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 DATAGROUP better, we need to consider many other factors. Even so, be aware that DATAGROUP is showing 2 warning signs in our investment analysis , you should know about...

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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.