Investors in A.P. Møller - Mærsk (CPH:MAERSK B) have seen stellar returns of 253% over the past 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 while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the A.P. Møller - Mærsk A/S (CPH:MAERSK B) share price is up 84% in the last 5 years, clearly besting the market return of around 42% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 20% in the last year, including dividends.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, A.P. Møller - Mærsk achieved compound earnings per share (EPS) growth of 77% per year. This EPS growth is higher than the 13% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 4.36 also suggests market apprehension.

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

We know that A.P. Møller - Mærsk has improved its bottom line lately, but is it going to grow revenue? Check if analysts think A.P. Møller - Mærsk will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of A.P. Møller - Mærsk, it has a TSR of 253% 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

We're pleased to report that A.P. Møller - Mærsk shareholders have received a total shareholder return of 20% over one year. Of course, that includes the dividend. However, the TSR over five years, coming in at 29% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand A.P. Møller - Mærsk better, we need to consider many other factors. Take risks, for example - A.P. Møller - Mærsk has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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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.