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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. Unfortunately, that's been the case for longer term SGL Carbon SE (ETR:SGL) shareholders, since the share price is down 35% in the last three years, falling well short of the market decline of around 2.3%. And the ride hasn't got any smoother in recent times over the last year, with the price 34% lower in that time. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for SGL Carbon
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. 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 five years of share price growth, SGL Carbon moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that SGL Carbon has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling SGL Carbon stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in SGL Carbon had a tough year, with a total loss of 34%, against a market gain of about 18%. 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 1.5% 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. Before deciding if you like the current share price, check how SGL Carbon scores on these 3 valuation metrics.