For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in HORNBACH Baumarkt AG (FRA:HBM), since the last five years saw the share price fall 38%. And some of the more recent buyers are probably worried, too, with the stock falling 38% in the last year. It’s up 1.9% in the last seven days.
View our latest analysis for HORNBACH Baumarkt
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years over which the share price declined, HORNBACH Baumarkt’s earnings per share (EPS) dropped by 0.8% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 9.2% per year, over the period. This implies that the market is more cautious about the business these days.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on HORNBACH Baumarkt’s earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of HORNBACH Baumarkt, it has a TSR of -31% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 4.9% in the twelve months, HORNBACH Baumarkt shareholders did even worse, losing 36% (even including dividends). Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7.2% over the last half decade. 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. Before forming an opinion on HORNBACH Baumarkt you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.