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Imagine Owning ElringKlinger (ETR:ZIL2) And Trying To Stomach The 80% Share Price Drop

Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held ElringKlinger AG (ETR:ZIL2) for half a decade as the share price tanked 80%. And we doubt long term believers are the only worried holders, since the stock price has declined 21% over the last twelve months. Even worse, it's down 25% in about a month, which isn't fun at all.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for ElringKlinger

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over five years ElringKlinger's earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. At present it's hard to make valid comparisons between EPS and the share price. However, we can say we'd expect to see a falling share price in this scenario.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

XTRA:ZIL2 Past and Future Earnings, February 5th 2020
XTRA:ZIL2 Past and Future Earnings, February 5th 2020

It might be well worthwhile taking a look at our free report on ElringKlinger's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between ElringKlinger's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that ElringKlinger's TSR, which was a 78% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 14% in the last year, ElringKlinger shareholders lost 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 26% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand ElringKlinger better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for ElringKlinger you should be aware of, and 1 of them is concerning.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.