Fabasoft (ETR:FAA) Has Rewarded Shareholders With An Exceptional 942% Total Return On Their Investment

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the Fabasoft AG (ETR:FAA) share price has soared 829% over five years. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 28% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Anyone who held for that rewarding ride would probably be keen to talk about it.

View our latest analysis for Fabasoft

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, Fabasoft managed to grow its earnings per share at 30% a year. This EPS growth is lower than the 56% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 46.73.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Fabasoft has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Fabasoft's balance sheet strength 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Fabasoft's TSR for the last 5 years was 942%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Fabasoft shareholders have received a total shareholder return of 86% over one year. Of course, that includes the dividend. That's better than the annualised return of 60% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Fabasoft you should know about.

We will like Fabasoft better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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