Despite the downward trend in earnings at Bechtle (ETR:BC8) the stock swells 15%, bringing one-year gains to 46%
The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Bechtle AG (ETR:BC8) share price is 43% higher than it was a year ago, much better than the market return of around 11% (not including dividends) in the same period. That’s a solid performance by our standards! Having said that, the longer term returns aren’t so impressive, with stock gaining just 22% in three years.
After a strong gain in the past week, it’s worth seeing if longer term returns have been driven by improving fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last twelve months, Bechtle actually shrank its EPS by 14%.
This means it’s unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
We are skeptical of the suggestion that the 1.6% dividend yield would entice buyers to the stock. Revenue was pretty flat year on year, but maybe a closer look at the data can explain the market optimism.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Bechtle is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Bechtle stock, you should check out this free report showing analyst consensus estimates for future profits.
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 Bechtle the TSR over the last 1 year was 46%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
It’s nice to see that Bechtle shareholders have received a total shareholder return of 46% over the last year. And that does include the dividend. That certainly beats the loss of about 3% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Is Bechtle cheap compared to other companies? These 3 valuation measures might help you decide.
