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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in KWS SAAT SE & Co. KGaA (ETR:KWS) have tasted that bitter downside in the last year, as the share price dropped 22%. That contrasts poorly with the market return of 6.5%. Looking at the longer term, the stock is down 19% over three years.
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 KWS SAAT SE KGaA
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Even though the KWS SAAT SE KGaA share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
With a low yield of 1.8% we doubt that the dividend influences the share price much. KWS SAAT SE KGaA's revenue is actually up 15% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that KWS SAAT SE KGaA has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling KWS SAAT SE KGaA stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Investors in KWS SAAT SE KGaA had a tough year, with a total loss of 21% (including dividends), against a market gain of about 6.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.9% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand KWS SAAT SE KGaA better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with KWS SAAT SE KGaA (including 1 which is a bit concerning) .