It may not be enough for some shareholders, but we United Internet AG (ETR:UTDI) stock is up 21% in one quarter. But the fact that the three-year return isn’t all that impressive doesn’t help. In fact, the stock price is down 38% over the past three years, well below the market return.
Shareholders are down over the long term, so let’s take a look at the underlying fundamentals over that time period to see if that’s in line with the returns.
Check out our latest analysis for United Internet.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
During the three years that the stock price fell, United Internet’s earnings per share (EPS) fell by 10% each year. This decline in EPS is slower than the 15% annual decline in the share price. So it seems like the market used to have too much confidence in this business.
You can see below how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend taking a closer look at its historical growth trends, available here.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock 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 increases and spin-offs. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. We note that United Internet’s TSR over the last three years was -34%, which is better than the share price return mentioned above. This is primarily due to dividend payments.
different perspective
It’s good to see that United Internet returned a total return of 30% to shareholders in the over the last twelve months. Of course, this includes dividends. There’s no doubt that these recent returns are much better than the TSR loss of 4% per year over five years. Long-term losses make us cautious, but short-term TSR increases certainly suggest a bright future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we identified 2 warning signs for United Internet What you need to know.
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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 complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if United Internet is potentially overvalued or undervalued. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
