Equity investors are typically looking for stocks that will outperform the overall market. Active stock selection involves risk (diversification is necessary), but it can also produce excess returns. That said, Pfeiffer Vacuum Technology’s share price has risen 27% over five years, comfortably beating the market return of 4.6% excluding dividends. However, more recent returns have been less impressive, with the stock returning just 8.4% including dividends last year.
Last week we saw the company’s five-year earnings loss, but let’s look at the recent trends in the underlying business to see if earnings are in line.
Read our latest analysis for Pfeiffer Vacuum Technologies
In his essay “The Superinvestors of Graham-and-Doddsville”, Warren Buffett said that share prices do not necessarily rationally reflect the value of a company.One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years that the share price has grown, Pfeiffer Vacuum Technology has achieved compound annual growth in earnings per share (EPS) of 2.3%. This EPS growth rate is lower than the 5% annual growth rate of the share price over the same period. It is therefore reasonable to consider that the market values the company more highly than it did five years ago. This is not necessarily surprising given the five-year track record of earnings growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
XTRA:PFV Earnings Per Share Growth 07/13/2024
Before buying or selling a stock, we always recommend a close look at historic growth trends, which you can find here.
What about dividends?
In addition to measuring the 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 any dividend received was reinvested) as well as the calculated value of any discounted capital raisings and spin-offs. As such, for companies that pay generous dividends, the TSR will often be much higher than the share price return. In the case of Pfeiffer Vacuum Technology, the TSR for the past 5 years was 39%, which exceeds the share price return mentioned above. Therefore, the dividends paid by the company are boosting its total shareholder return.
A different perspective
It’s good to see that Pfeiffer Vacuum Technology has delivered a total shareholder return of 8.4% to shareholders in the last twelve months, including dividends. This is better than the five-year annualized return of 7%, suggesting the company has been performing well recently. In the best-case scenario, this could suggest some real business momentum and now could be a good time to dig deeper. While it’s well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Nevertheless, be aware that Pfeiffer Vacuum Technology is showing 1 warning sign in our investment analysis. You should know about the following…
If we see significant insider buying, our valuation of Pfeiffer Vacuum Technology will likely increase. While we wait, check out this free list of undervalued stocks (mostly small-cap stocks) that have seen significant, recent insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
Valuation is complicated, but we can help make it simple.
Find out if Pfeiffer Vacuum Technology is overvalued or undervalued by checking our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financials and more.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
Valuation is complicated, but we can help make it simple.
Find out if Pfeiffer Vacuum Technology is overvalued or undervalued by checking our comprehensive analysis, including fair value estimates, risks and warnings, dividends, insider transactions, financials and more.
View free analysis
Have something to say about this article? If you have any questions about the content, please contact us directly or email us at editorial-team@simplywallst.com.
