Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Deutsche Telekom AG (ETR:DTE) shareholders have enjoyed a 89% share price rise over the last half decade, well in excess of the market return of around 13% (not including dividends).

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.

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To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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, Deutsche Telekom achieved compound earnings per share (EPS) growth of 31% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 11.19 also suggests market apprehension.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Deutsche Telekom has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Deutsche Telekom’s TSR for the last 5 years was 123%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

Investors in Deutsche Telekom had a tough year, with a total loss of 0.7% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It’s always interesting to track share price performance over the longer term. But to understand Deutsche Telekom better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 1 warning sign with Deutsche Telekom , and understanding them should be part of your investment process.