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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 its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term NÜRNBERGER Beteiligungs-AG (ETR:NBG6) shareholders, since the share price is down 46% in the last three years, falling well short of the market decline of around 9.7%. The more recent news is of little comfort, with the share price down 33% in a year.
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.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the three years that the share price declined, NÜRNBERGER Beteiligungs-AG's earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .
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 NÜRNBERGER Beteiligungs-AG the TSR over the last 3 years was -38%, 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 5.0% in the last year, NÜRNBERGER Beteiligungs-AG shareholders lost 30% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 - NÜRNBERGER Beteiligungs-AG has 1 warning sign we think you should be aware of.