Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Heidelberger Druckmaschinen Aktiengesellschaft (FRA:HDD) shareholders. Regrettably, they have had to cope with a 64% drop in the share price over that period. And over the last year the share price fell 61%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years that the share price fell, Heidelberger Druckmaschinen's earnings per share (EPS) dropped by 12% each year. The share price decline of 29% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Heidelberger Druckmaschinen has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Heidelberger Druckmaschinen will grow revenue in the future.
A Different Perspective
While the broader market lost about 9.1% in the twelve months, Heidelberger Druckmaschinen shareholders did even worse, losing 61%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. We realise that Buffett 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 businesses. Is Heidelberger Druckmaschinen cheap compared to other companies? These 3 valuation measures might help you decide.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.