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Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So consider, for a moment, the misfortune of CompuGroup Medical SE & Co. KGaA (ETR:COP) investors who have held the stock for three years as it declined a whopping 81%. That would be a disturbing experience. And over the last year the share price fell 63%, so we doubt many shareholders are delighted. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
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 CompuGroup Medical SE KGaA
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
CompuGroup Medical SE KGaA saw its EPS decline at a compound rate of 23% per year, over the last three years. This reduction in EPS is slower than the 43% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
Investors in CompuGroup Medical SE KGaA had a tough year, with a total loss of 61% (including dividends), against a market gain of about 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand CompuGroup Medical SE KGaA better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for CompuGroup Medical SE KGaA you should be aware of, and 1 of them makes us a bit uncomfortable.