Investing in Bank Handlowy w Warszawie (WSE:BHW) three years ago would have delivered you a 246% gain

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Bank Handlowy w Warszawie S.A. (WSE:BHW) share price has soared 177% in the last three years. How nice for those who held the stock! In the last week the share price is up 2.6%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Bank Handlowy w Warszawie

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Bank Handlowy w Warszawie was able to grow its EPS at 136% per year over three years, sending the share price higher. The average annual share price increase of 40% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.29.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Bank Handlowy w Warszawie 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 Bank Handlowy w Warszawie stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Bank Handlowy w Warszawie, it has a TSR of 246% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Bank Handlowy w Warszawie has rewarded shareholders with a total shareholder return of 53% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Bank Handlowy w Warszawie (of which 1 doesn't sit too well with us!) you should know about.

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 Polish 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.