Did Changing Sentiment Drive Aurubis's (ETR:NDA) Share Price Down By 43%?
For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Aurubis AG (ETR:NDA) shareholders, since the share price is down 43% in the last three years, falling well short of the market return of around -19%. And more recent buyers are having a tough time too, with a drop of 25% in the last year. Furthermore, it's down 34% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 26% in the same timeframe.
See our latest analysis for Aurubis
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Although the share price is down over three years, Aurubis actually managed to grow EPS by 4.1% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. Looking to other metrics might better explain the share price change.
Revenue is actually up 4.1% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Aurubis further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Aurubis is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Aurubis stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Aurubis's TSR for the last 3 years was -38%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Aurubis shareholders are down 23% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.0% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Aurubis , and understanding them should be part of your investment process.
Of course Aurubis may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
