EnBW Energie Baden-Württemberg's (ETR:EBK) investors will be pleased with their favorable 52% return over the last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the EnBW Energie Baden-Württemberg AG (ETR:EBK) share price is up 41% in the last 5 years, clearly besting the market return of around 24% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 7.6% in the last year, including dividends.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for EnBW Energie Baden-Württemberg

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 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, EnBW Energie Baden-Württemberg achieved compound earnings per share (EPS) growth of 31% per year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

It might be well worthwhile taking a look at our free report on EnBW Energie Baden-Württemberg'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of EnBW Energie Baden-Württemberg, it has a TSR of 52% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

EnBW Energie Baden-Württemberg provided a TSR of 7.6% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 9% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that EnBW Energie Baden-Württemberg is showing 4 warning signs in our investment analysis , and 1 of those is significant...

But note: EnBW Energie Baden-Württemberg 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.