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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Paul Hartmann AG (FRA:PHH2) shareholders, since the share price is down 46% in the last three years, falling well short of the market decline of around 4.5%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for Paul Hartmann
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.
Paul Hartmann saw its EPS decline at a compound rate of 17% per year, over the last three years. This change in EPS is reasonably close to the 19% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. In this case, it seems that the EPS is guiding the share price.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Paul Hartmann the TSR over the last 3 years was -41%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Paul Hartmann shareholders are up 4.5% for the year (even including dividends). Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 5% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Paul Hartmann better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Paul Hartmann you should know about.