Vestas Wind Systems (CPH:VWS) delivers shareholders solid 19% CAGR over 5 years, surging 3.5% in the last week alone

Vestas Wind Systems A/S (CPH:VWS) shareholders might be concerned after seeing the share price drop 10% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 130% in that time. To some, the recent pullback wouldn't be surprising after such a fast rise. Ultimately business performance will determine whether the stock price continues the positive long term trend.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Vestas Wind Systems

Vestas Wind Systems wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

For the last half decade, Vestas Wind Systems can boast revenue growth at a rate of 10% per year. That's a pretty good long term growth rate. Broadly speaking, this solid progress may well be reflected by the healthy share price gain of 18% per year over five years. It's well worth monitoring the growth trend in revenue, because if growth accelerates, that might signal an opportunity. Accelerating growth can be a sign of an inflection point - and could indicate profits lie ahead. Worth watching 100%

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Vestas Wind Systems is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Vestas Wind Systems in this interactive graph of future profit estimates.

A Dividend Lost

It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. In some ways, TSR is a better measure of how well an investment has performed. Vestas Wind Systems' TSR over the last 5 years is 138%; better than its share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.

A Different Perspective

Vestas Wind Systems provided a TSR of 17% 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 19% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Vestas Wind Systems , and understanding them should be part of your investment process.

We will like Vestas Wind Systems 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 Danish 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.