PSI Software's (ETR:PSAN) five-year earnings growth trails the impressive shareholder returns

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term PSI Software AG (ETR:PSAN) shareholders would be well aware of this, since the stock is up 109% in five years. Also pleasing for shareholders was the 41% gain in the last three months. 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.

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

Check out our latest analysis for PSI Software

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, PSI Software achieved compound earnings per share (EPS) growth of 11% per year. This EPS growth is lower than the 16% 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.

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

It might be well worthwhile taking a look at our free report on PSI Software's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, PSI Software's TSR for the last 5 years was 120%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that PSI Software has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 17% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand PSI Software better, we need to consider many other factors. Take risks, for example - PSI Software has 1 warning sign we think you should be aware of.

But note: PSI Software 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 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.