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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Siltronic AG (ETR:WAF) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 63% in that time. The more recent news is of little comfort, with the share price down 41% in a year. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Siltronic
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, Siltronic's earnings per share (EPS) dropped by 22% each year. This change in EPS is reasonably close to the 28% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.
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.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Siltronic's TSR for the last 3 years was -59%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Siltronic shareholders are down 40% for the year (even including dividends), but the market itself is up 12%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Siltronic better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Siltronic (including 2 which are potentially serious) .