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Stock pickers are always searching for stocks that can outperform the broader market. The Hellenic Telecommunications Organization (HTO) has demonstrated impressive growth, with its share price increasing by 25% over the past five years, outperforming the market decline of 20% (excluding dividends).

Looking at the recent market performance, HTO has added €232m to its market capitalization in just one week. To determine if this recent surge is driven by underlying performance, let’s analyze the company’s long-term returns.

When considering Benjamin Graham’s analogy that the market is a voting machine in the short term but a weighing machine over the long term, we can evaluate how investor sentiment towards HTO has evolved. By comparing earnings per share (EPS) growth and share price changes over time, we can gauge investor attitudes. HTO achieved compound EPS growth of 16% per year during the five-year period, surpassing the average annual increase of 5% in share price. This suggests that the market is not currently enthusiastic about the stock.

In addition to share price return, investors should also consider the total shareholder return (TSR), which accounts for cash dividends and the value of any discounted capital raisings and spin-offs. HTO has a TSR of 56% for the last five years, exceeding its share price return. Dividend payments largely explain this divergence.

Looking at the stock’s performance over the past year, HTO experienced a total loss of 14% (including dividends), while the market gained approximately 41%. While share prices of even good stocks can drop, it is essential to monitor the fundamental metrics of a business for signs of improvement.

Longer-term investors have seen an annual return of 9% over the past five years. If the fundamental data continues to indicate sustainable growth, the current sell-off could present a potential opportunity.

While analyzing share prices over the long term provides valuable insight into business performance, it is essential to consider other information as well. It is worth noting that there is a warning sign for Hellenic Telecommunications Organization that investors should be aware of.

Please note that the market returns mentioned in this analysis reflect the market-weighted average returns of stocks trading on Greek exchanges. This article is for general informational purposes only and is not intended as financial advice.

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