As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Ferratum Oyj (ETR:FRU) shareholders have had that experience, with the share price dropping 41% in three years, versus a market return of about 19%. And the ride hasn't got any smoother in recent times over the last year, with the price 25% lower in that time. Furthermore, it's down 19% in about a quarter. That's not much fun for holders.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Although the share price is down over three years, Ferratum Oyj actually managed to grow EPS by 22% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Revenue is actually up 22% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Ferratum Oyj more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Ferratum Oyj will earn in the future (free profit forecasts).
A Different Perspective
Over the last year, Ferratum Oyj shareholders took a loss of 24% , including dividends . In contrast the market gained about 7.0%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 15% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before forming an opinion on Ferratum Oyj you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.