Investing in Koninklijke KPN (AMS:KPN) five years ago would have delivered you a 58% gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Koninklijke KPN N.V. (AMS:KPN) share price is up 25% in the last five years, that's less than the market return. Zooming in, the stock is up just 4.3% in the last year.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Koninklijke KPN

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Koninklijke KPN achieved compound earnings per share (EPS) growth of 13% per year. The EPS growth is more impressive than the yearly share price gain of 5% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

It might be well worthwhile taking a look at our free report on Koninklijke KPN'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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Koninklijke KPN the TSR over the last 5 years was 58%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Koninklijke KPN has rewarded shareholders with a total shareholder return of 9.1% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 10% per year, is even more impressive. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Koninklijke KPN that you should be aware of before investing here.

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 Dutch 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.