Despite shrinking by kr.15b in the past week, A.P. Møller - Mærsk (CPH:MAERSK B) shareholders are still up 180% over 5 years

If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the A.P. Møller - Mærsk A/S (CPH:MAERSK B) share price is up 46% in the last five years, that's less than the market return. However, if you include the dividends then the return is market beating. The last year has been disappointing, with the stock price down 11% in that time.

Since the long term performance has been good but there's been a recent pullback of 6.7%, let's check if the fundamentals match the share price.

Check out our latest analysis for A.P. Møller - Mærsk

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years of share price growth, A.P. Møller - Mærsk moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. In fact, the A.P. Møller - Mærsk stock price is 12% lower in the last three years. In the same period, EPS is up 117% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -4% a year for three years.

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

It is of course excellent to see how A.P. Møller - Mærsk has grown profits over the years, but the future is more important for shareholders. This free interactive report on A.P. Møller - Mærsk's balance sheet strength 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. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of A.P. Møller - Mærsk, it has a TSR of 180% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

A.P. Møller - Mærsk provided a TSR of 23% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 23% per year over five year. This suggests the company might be improving over time. 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 4 warning signs with A.P. Møller - Mærsk (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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.