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Those who invested in EnBW Energie Baden-Württemberg (ETR:EBK) five years ago are up 242%
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. One great example is EnBW Energie Baden-Württemberg AG (ETR:EBK) which saw its share price drive 217% higher over five years. The last week saw the share price soften some 1.6%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out 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 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, EnBW Energie Baden-Württemberg achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is lower than the 26% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into EnBW Energie Baden-Württemberg's key metrics by checking this interactive graph of EnBW Energie Baden-Württemberg's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for EnBW Energie Baden-Württemberg the TSR over the last 5 years was 242%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that EnBW Energie Baden-Württemberg shareholders have received a total shareholder return of 3.1% over one year. That's including the dividend. However, the TSR over five years, coming in at 28% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for EnBW Energie Baden-Württemberg (of which 1 shouldn't be ignored!) you should know about.
We will like EnBW Energie Baden-Württemberg better if we see some big insider buys. While we wait, check out this free list of growing companies 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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Find out whether EnBW Energie Baden-Württemberg is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
EnBW Energie Baden-Württemberg
EnBW Energie Baden-Württemberg AG operates as an integrated energy company in Germany, rest of Europe, and internationally.
Adequate balance sheet with questionable track record.