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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. We regret to report that long term Bechtle AG (ETR:BC8) shareholders have had that experience, with the share price dropping 50% in three years, versus a market decline of about 4.1%. And over the last year the share price fell 31%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days.
After losing 5.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for Bechtle
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.
During the unfortunate three years of share price decline, Bechtle actually saw its earnings per share (EPS) improve by 3.1% per year. 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.
It looks to us like the market was probably too optimistic around growth three years ago. However, taking a look at other business metrics might shed a bit more light on the share price action.
Revenue is actually up 8.3% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Bechtle 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).
Bechtle is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Bechtle's TSR for the last 3 years was -47%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.