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

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term GFT Technologies SE (ETR:GFT) shareholders would be well aware of this, since the stock is up 170% in five years. And in the last week the share price has popped 8.7%. But this might be partly because the broader market had a good week last week, gaining 4.6%.

The past week has proven to be lucrative for GFT Technologies investors, so let's see if fundamentals drove the company's five-year performance.

We've discovered 1 warning sign about GFT Technologies. View them for free.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, GFT Technologies managed to grow its earnings per share at 28% a year. The EPS growth is more impressive than the yearly share price gain of 22% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

Dive deeper into GFT Technologies' key metrics by checking this interactive graph of GFT Technologies's earnings, revenue and cash flow.

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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for GFT Technologies the TSR over the last 5 years was 190%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in GFT Technologies had a tough year, with a total loss of 21% (including dividends), against a market gain of about 11%. 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 24%, each year, over five years. 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 GFT Technologies better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with GFT Technologies , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.