Shareholders in SEB (EPA:SK) are in the red if they invested five years ago

SEB SA (EPA:SK) shareholders should be happy to see the share price up 10% in the last month. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 20% in that half decade.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

See our latest analysis for SEB

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 the five years over which the share price declined, SEB's earnings per share (EPS) dropped by 0.8% each year. This reduction in EPS is less than the 4% annual reduction in the share price. This implies that the market is more cautious about the business these days.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that SEB has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

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 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. As it happens, SEB's TSR for the last 5 years was -11%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that SEB has rewarded shareholders with a total shareholder return of 15% in the last twelve months. And that does include the dividend. There's no doubt those recent returns are much better than the TSR loss of 2% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For example, we've discovered 2 warning signs for SEB that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French 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.