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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term KWS SAAT SE & Co. KGaA (ETR:KWS) shareholders have had that experience, with the share price dropping 30% in three years, versus a market decline of about 4.1%. In contrast, the stock price has popped 9.8% in the last thirty days.
The recent uptick of 5.8% could be a positive sign of things to come, so let's take a look at historical fundamentals.
View our latest analysis for KWS SAAT SE KGaA
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Although the share price is down over three years, KWS SAAT SE KGaA actually managed to grow EPS by 0.8% 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.
After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. Looking to other metrics might better explain the share price change.
With a rather small yield of just 1.7% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 13% 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 KWS SAAT SE KGaA 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).
If you are thinking of buying or selling KWS SAAT SE KGaA stock, you should check out this FREE detailed report on its balance sheet.
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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for KWS SAAT SE KGaA the TSR over the last 3 years was -27%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!