Does Siemens Healthineers's (ETR:SHL) Share Price Gain of 23% Match Its Business Performance?
Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Siemens Healthineers AG (ETR:SHL) share price is 23% higher than it was a year ago, much better than the market return of around 16% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! We'll need to follow Siemens Healthineers for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
See our latest analysis for Siemens Healthineers
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 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.
Siemens Healthineers was able to grow EPS by 24% in the last twelve months. This EPS growth is reasonably close to the 23% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Siemens Healthineers has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Siemens Healthineers the TSR over the last year was 25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Siemens Healthineers boasts a total shareholder return of 25% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 17% in the last three months. This suggests the company is continuing to win over new investors. 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 2 warning signs with Siemens Healthineers , and understanding them should be part of your investment process.
Of course Siemens Healthineers may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
