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One of the frustrations of investing is when a stock goes down. But when the market is down, you're bound to have some losers. While the Bayerische Motoren Werke Aktiengesellschaft (ETR:BMW) share price is down 21% in the last three years, the total return to shareholders (which includes dividends) was -2.4%. And that total return actually beats the market decline of 5.2%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Bayerische Motoren Werke
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
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. As it happens, Bayerische Motoren Werke's TSR for the last 3 years was -2.4%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in Bayerische Motoren Werke had a tough year, with a total loss of 12% (including dividends), against a market gain of about 16%. 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 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Bayerische Motoren Werke has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
We will like Bayerische Motoren Werke better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.