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For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Koenig & Bauer AG (ETR:SKB) shareholders have had that experience, with the share price dropping 21% in three years, versus a market return of about 29%. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.
If the past week is anything to go by, investor sentiment for Koenig & Bauer isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
We've discovered 1 warning sign about Koenig & Bauer. View them for free.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the three years that the share price declined, Koenig & Bauer's earnings per share (EPS) dropped significantly, falling to a loss. 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!
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Koenig & Bauer's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Koenig & Bauer's TSR for the year was broadly in line with the market average, at 17%. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 3% over the last five years. While 'turnarounds seldom turn' there are green shoots for Koenig & Bauer. 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 - Koenig & Bauer has 1 warning sign we think you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.