Shareholders of Mensch und Maschine Software (ETR:MUM) Must Be Delighted With Their 582% Total Return

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Mensch und Maschine Software SE (ETR:MUM) shares for the last five years, while they gained 520%. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 17% in about a quarter.

We love happy stories like this one. The company should be really proud of that performance!

See our latest analysis for Mensch und Maschine Software

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, Mensch und Maschine Software managed to grow its earnings per share at 33% a year. This EPS growth is slower than the share price growth of 44% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 54.94.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Mensch und Maschine Software has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Mensch und Maschine Software's TSR for the last 5 years was 582%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Mensch und Maschine Software shareholders have received a total shareholder return of 44% over the last year. That's including the dividend. However, that falls short of the 47% TSR per annum it has made for shareholders, each year, over five years. 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. Take risks, for example - Mensch und Maschine Software has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are 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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