United Internet (ETR:UTDI) investors are sitting on a 39% loss if they had invested five years ago

The main goal of stock picking is to find stocks that beat the market. But every investor is virtually certain to have both overperforming and underperforming stocks. At this point, some shareholders may question their investment in United Internet AG (ETR:UTDI), over the last five years, the share price has fallen 45%.

With this in mind, it is worth seeing whether the underlying fundamentals of the business have been the driver of long-term performance, or whether there are gaps.

Check out our latest analysis for United Internet

To quote Buffett: “Ships will sail around the world but the Flat Earth Society will prosper.” There will continue to be wide discrepancies between price and value in the market…’ An imperfect but simple way to examine how the market’s perception of a company has changed is to compare the The evolution of earnings per share (EPS) with that of the stock. price movement.

Looking back five years, United Internet’s stock price and EPS have declined; the latter at a rate of 30% per year. This EPS decline is worse than the 11% compound annual decline in the stock price. So the market may have previously expected a decline, or it may expect the situation to improve. The high P/E ratio of 125.02 suggests that shareholders believe earnings will grow in the coming years.

The chart below illustrates how EPS has changed over time (unveil the exact values ​​by clicking on the image).

Dive deeper into United Internet’s key metrics by checking out this interactive graph of United Internet’s earnings, revenue and cash flow.

What about dividends?

In addition to measuring share price return, investors should also consider total shareholder return (TSR). The TSR includes the value of any spin-offs or discounted capital increases, as well as any dividends, assuming the dividends are reinvested. Arguably, the TSR gives a more complete picture of the return generated by a stock. As it turns out, United Internet’s TSR over the last 5 years was -39%, which exceeds the share price return mentioned earlier. And there’s no point guessing that dividend payments largely explain this divergence!

A different perspective

United Internet investors had a tough year, with a total loss of 6.5% (including dividends), compared to a market gain of around 17%. Even good quality stock prices fall sometimes, but we want to see improvements in a company’s fundamentals before we get too interested. However, last year’s loss is not as bad as the 7% loss per year that investors have suffered over the past five years. We would like to have clear information suggesting that the company will grow, before assuming that the share price will stabilize. It’s always interesting to follow share price performance over the long term. But to better understand United Internet, we need to consider many other factors. However, be aware that United Internet displays 3 warning signs in our investment analysis and 1 of them is significant…

The story continues

Of course United Internet may not be the best stock to buy. So you might want to see this free collection of growth stocks.

Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on German stock exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. 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 stocks mentioned.