Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by HAEMATO AG (ETR:HAE) shareholders over the last year, as the share price declined 36%. That falls noticeably short of the market return of around -7.7%. Notably, shareholders had a tough run over the longer term, too, with a drop of 33% in the last three years. The falls have accelerated recently, with the share price down 32% in the last three months.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Unfortunately HAEMATO reported an EPS drop of 14% for the last year. This reduction in EPS is not as bad as the 36% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on HAEMATO's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between HAEMATO's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for HAEMATO shareholders, and that cash payout explains why its total shareholder loss of 35%, over the last year, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 7.7% in the twelve months, HAEMATO shareholders did even worse, losing 35% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 1.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Importantly, we haven't analysed HAEMATO's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
We will like HAEMATO better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 email@example.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. Thank you for reading.