Bayerische Motoren Werke (ETR:BMW) delivers shareholders favorable 12% CAGR over 5 years, surging 6.7% in the last week alone
When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Bayerische Motoren Werke share price has climbed 34% in five years, easily topping the market return of 18% (ignoring dividends).
Since the stock has added €1.6b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.
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 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).
During the five years of share price growth, Bayerische Motoren Werke moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Bayerische Motoren Werke's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. We note that for Bayerische Motoren Werke the TSR over the last 5 years was 80%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
Bayerische Motoren Werke shareholders are down 8.3% for the year (even including dividends), but the market itself is up 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Bayerische Motoren Werke (at least 1 which is concerning) , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
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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.
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