Logwin's (ETR:TGHN) five-year earnings growth trails the 18% YoY shareholder returns

When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, long term Logwin AG (ETR:TGHN) shareholders have enjoyed a 84% share price rise over the last half decade, well in excess of the market return of around 13% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 9.6% in the last year, including dividends.

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

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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 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.

During five years of share price growth, Logwin achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is higher than the 13% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.81.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Logwin's earnings, revenue and cash flow 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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Logwin's TSR for the last 5 years was 133%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Logwin shareholders gained a total return of 9.6% during the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 18% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. For example, we've discovered 1 warning sign for Logwin that you should be aware of before investing here.

We will like Logwin better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.