In This Article:
Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Grenke AG (ETR:GLJ) for five years would be nursing their metaphorical wounds since the share price dropped 75% in that time. And we doubt long term believers are the only worried holders, since the stock price has declined 31% over the last twelve months. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Grenke
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Looking back five years, both Grenke's share price and EPS declined; the latter at a rate of 1.6% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 24% per year, over the period. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.85 further reflects this reticence.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We regret to report that Grenke shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with Grenke (including 1 which is concerning) .