Investors in Demant (CPH:DEMANT) have seen notable returns of 32% over the past five years

While Demant A/S (CPH:DEMANT) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 23% in the last quarter. But the silver lining is the stock is up over five years. Unfortunately its return of 32% is below the market return of 53%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 31% drop, in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Our free stock report includes 1 warning sign investors should be aware of before investing in Demant. Read for free now.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Demant achieved compound earnings per share (EPS) growth of 18% per year. This EPS growth is higher than the 6% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Demant's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

The total return of 31% received by Demant shareholders over the last year isn't far from the market return of -33%. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand Demant better, we need to consider many other factors. For instance, we've identified 1 warning sign for Demant that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.