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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the 1&1 AG (ETR:1U1) share price dropped 53% over five years. That's not a lot of fun for true believers. The falls have accelerated recently, with the share price down 17% in the last three months.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
View our latest analysis for 1&1
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both 1&1's share price and EPS declined; the latter at a rate of 7.7% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 14% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 8.72 further reflects this reticence.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into 1&1's key metrics by checking this interactive graph of 1&1's earnings, revenue and cash flow.
A Different Perspective
Investors in 1&1 had a tough year, with a total loss of 16% (including dividends), against a market gain of about 8.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand 1&1 better, we need to consider many other factors. Even so, be aware that 1&1 is showing 1 warning sign in our investment analysis , you should know about...
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.