In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Siemens Gamesa Renewable Energy, S.A. (BME:SGRE) shareholders have had that experience, with the share price dropping 31% in three years, versus a market return of about -23%. The good news is that the stock is up 1.9% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the three years that the share price declined, Siemens Gamesa Renewable Energy's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. 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).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
Siemens Gamesa Renewable Energy shareholders may not have made money over the last year, but their total loss of 9.9% isn't as bad as the market loss of around 9.9%. Furthermore, the stock lost shareholders 11% per year over three years, so the one-year return was better in a relative sense. It could well be that the business has begun to stabilize, though the recent returns are hardly impressive. If you would like to research Siemens Gamesa Renewable Energy in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ES exchanges.
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.
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