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The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Telefónica Deutschland Holding AG (FRA:O2D), since the last five years saw the share price fall 58%. And we doubt long term believers are the only worried holders, since the stock price has declined 30% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
Because Telefónica Deutschland Holding is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over five years, Telefónica Deutschland Holding grew its revenue at 6.3% per year. That’s a pretty good rate for a long time period. The share price, meanwhile, has fallen 16% compounded, over five years. It seems probably that the business has failed to live up to initial expectations. A pessimistic market can create opportunities.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Telefónica Deutschland Holding is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Telefónica Deutschland Holding, it has a TSR of -26% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market lost about 7.9% in the twelve months, Telefónica Deutschland Holding shareholders did even worse, losing 23% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.9% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Keeping this in mind, a solid next step might be to take a look at Telefónica Deutschland Holding’s dividend track record. This free interactive graph is a great place to start.
But note: Telefónica Deutschland Holding 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.