Investing in Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt (BUSE:RICHTER) five years ago would have delivered you a 106% gain

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. To wit, the Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt share price has climbed 80% in five years, easily topping the market return of 34% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 30% in the last year , including dividends .

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt managed to grow its earnings per share at 47% a year. The EPS growth is more impressive than the yearly share price gain of 13% over the same period. 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).

Dive deeper into Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt's key metrics by checking this interactive graph of Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt, it has a TSR of 106% 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

Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt provided a TSR of 30% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 16% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt better, we need to consider many other factors. Take risks, for example - Richter Gedeon Vegyészeti Gyár Nyilvánosan Muködo Rt has 2 warning signs we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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