Question

The company has shown the stock price appreciation with a CAGR of 7.2%. In addition Siemens has a dividend yield of 3.27% and the company has been regularly buying back shares which has been creating shareholder's wealth.

Siemens is a well diversified company with global operations and with above results I believe the company has been doing fairly well in terms of its operations. The company is also successful in creating shareholder wealth through dividend payouts and share buybacks.

question is about the seimens stock fluctuations according to above information.

It appears, based on the Seimens stock performance that the stockholders achieve growth yet seem to have dips and peeks along the way. Do you know if this is standard in the industry and competitors have similar fluctuations?

Answer 1

Changes in market share have less impact on companies in growth industries. In these industries, the total pie is growing, so companies can still be growing sales even if they are losing market share. For companies in this situation, the stock performance is more affected by sales growth and margins than other factors.

In cyclical industries, competition for market share is brutal. Economic factors play a larger role in the variance of sales, earnings and margins, more than other factors. Margins tend to be low and operations run at maximum efficiency due to competition. Since sales come at the expense of other companies, they invest heavily in marketing efforts or even loss leaders to attract sales.

In these industries, companies may be willing to lose money on products temporarily to force competitors to give up or declare bankruptcy. Once they gain greater market share and competitors are ousted, they attempt to raise prices. This strategy can work, or it can backfire, compounding their losses.