Shareholders of DATAGROUP (ETR:D6H) Must Be Delighted With Their 363% Total Return

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the DATAGROUP SE (ETR:D6H) share price. It's 334% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 35% in about a quarter.

View our latest analysis for DATAGROUP

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, DATAGROUP actually saw its EPS drop 46% per year. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The modest 1.2% dividend yield is unlikely to be propping up the share price. On the other hand, DATAGROUP's revenue is growing nicely, at a compound rate of 17% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, DATAGROUP's TSR for the last 5 years was 363%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

DATAGROUP shareholders are down 12% for the year (even including dividends), but the market itself is up 9.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 36%, 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 4 warning signs in our investment analysis , you should know about...

But note: DATAGROUP 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.

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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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