Schneider Electric S.E. (EPA:SU) shareholders might be concerned after seeing the share price drop 10% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 126% in that time. To some, the recent pullback wouldn’t be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Schneider Electric
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Schneider Electric achieved compound earnings per share (EPS) growth of 12% per year. This EPS growth is lower than the 18% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Schneider Electric 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Schneider Electric the TSR over the last 5 years was 160%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Schneider Electric provided a TSR of 15% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 21% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It’s always interesting to track share price performance over the longer term. But to understand Schneider Electric better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Schneider Electric.
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