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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Fabasoft AG (ETR:FAA) have had an unfortunate run in the last three years. Sadly for them, the share price is down 56% in that time. Shareholders have had an even rougher run lately, with the share price down 22% 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.
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.
Check out our latest analysis for Fabasoft
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.
Although the share price is down over three years, Fabasoft actually managed to grow EPS by 7.1% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
With a rather small yield of just 0.6% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 16% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Fabasoft further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Fabasoft has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Fabasoft
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Fabasoft, it has a TSR of -54% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!