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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 if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term TAG Immobilien AG (ETR:TEG) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 26%. The falls have accelerated recently, with the share price down 19% in the last three months.
After losing 13% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
Check out our latest analysis for TAG Immobilien
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.
We know that TAG Immobilien has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 31% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating TAG Immobilien 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).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free report showing analyst forecasts should help you form a view on TAG Immobilien
A Dividend Lost
It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. Over the last 3 years, TAG Immobilien generated a TSR of -41%, which is, of course, better than the share price return. Although the company had to cut dividends, it has paid cash to shareholders in the past.
A Different Perspective
While the broader market gained around 20% in the last year, TAG Immobilien shareholders lost 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 1.3% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for TAG Immobilien that you should be aware of before investing here.