The past three years for 7C Solarparken (ETR:HRPK) investors has not been profitable
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 7C Solarparken AG (ETR:HRPK) shareholders have had that experience, with the share price dropping 21% in three years, versus a market decline of about 3.4%. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for 7C Solarparken
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. 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.
Although the share price is down over three years, 7C Solarparken actually managed to grow EPS by 13% 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). Or else the company was over-hyped in the past, and so its growth has disappointed.
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.
We note that, in three years, revenue has actually grown at a 22% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching 7C Solarparken more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for 7C Solarparken the TSR over the last 3 years was -14%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 11% in the last year, 7C Solarparken shareholders lost 10% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6%, 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. It's always interesting to track share price performance over the longer term. But to understand 7C Solarparken better, we need to consider many other factors. Take risks, for example - 7C Solarparken has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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 German exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
