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The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Stabilus SE (ETR:STM) have tasted that bitter downside in the last year, as the share price dropped 51%. That's disappointing when you consider the market returned 19%. Notably, shareholders had a tough run over the longer term, too, with a drop of 40% in the last three years. More recently, the share price has dropped a further 9.2% in a month.
With the stock having lost 6.3% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
View our latest analysis for Stabilus
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Unhappily, Stabilus had to report a 26% decline in EPS over the last year. This reduction in EPS is not as bad as the 51% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 9.95.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Stabilus' key metrics by checking this interactive graph of Stabilus's earnings, revenue and cash flow.
A Different Perspective
Investors in Stabilus had a tough year, with a total loss of 49% (including dividends), against a market gain of about 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 1.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Stabilus better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Stabilus .
We will like Stabilus better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.