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Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Gelsenwasser AG (FRA:WWG) shareholders. Unfortunately, they have held through a 66% decline in the share price in that time. And over the last year the share price fell 38%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 15% in the last three months.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Gelsenwasser
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.
Although the share price is down over three years, Gelsenwasser actually managed to grow EPS by 15% 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.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 5.5% each year, over three years. In that case, the current EPS might be viewed by some as difficult to sustain.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Gelsenwasser's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Gelsenwasser the TSR over the last 3 years was -63%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.