Stock Analysis

ASML Holding's (AMS:ASML) five-year total shareholder returns outpace the underlying earnings growth

  •  Updated
Source: Shutterstock

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For example, the ASML Holding N.V. (AMS:ASML) share price has soared 258% in the last half decade. Most would be very happy with that. In the last week shares have slid back 4.2%.

In light of the stock dropping 4.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for ASML Holding

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, ASML Holding managed to grow its earnings per share at 28% a year. This EPS growth is remarkably close to the 29% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

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

ENXTAM:ASML Earnings Per Share Growth April 26th 2023

We know that ASML Holding has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling ASML Holding stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for ASML Holding the TSR over the last 5 years was 274%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

ASML Holding's TSR for the year was broadly in line with the market average, at 8.0%. It has to be noted that the recent return falls short of the 30% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes ASML Holding a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand ASML Holding better, we need to consider many other factors. For example, we've discovered 1 warning sign for ASML Holding that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Valuation is complex, but we're helping make it simple.

Find out whether ASML Holding is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis