The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term HELLA GmbH & Co. KGaA (ETR:HLE) shareholders would be well aware of this, since the stock is up 272% in five years.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
View our latest analysis for HELLA GmbH KGaA
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, HELLA GmbH KGaA actually saw its EPS drop 12% per year.
This means it’s unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
The modest 0.8% dividend yield is unlikely to be propping up the share price. On the other hand, HELLA GmbH KGaA’s revenue is growing nicely, at a compound rate of 5.9% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on HELLA GmbH KGaA’s balance sheet strength is a great place to start, if you want to investigate the stock further.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of HELLA GmbH KGaA, it has a TSR of 299% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
HELLA GmbH KGaA shareholders are up 14% for the year (even including dividends). Unfortunately this falls short of the market return. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 32% over five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. Is HELLA GmbH KGaA cheap compared to other companies? These 3 valuation measures might help you decide.
But note: HELLA GmbH KGaA may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.