Imagine Owning Bayer (ETR:BAYN) And Wondering If The 39% Share Price Slide Is Justified

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Bayer Aktiengesellschaft (ETR:BAYN) shareholders for doubting their decision to hold, with the stock down 39% over a half decade.

See our latest analysis for Bayer

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.

Over five years Bayer’s earnings per share dropped significantly, falling to a loss, with the share price also lower. Since the company has fallen to a loss making position, it’s hard to compare the change in EPS with the share price change. However, we can say we’d expect to see a falling share price in this scenario.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

XTRA:BAYN Past and Future Earnings, December 8th 2019
XTRA:BAYN Past and Future Earnings, December 8th 2019

Dive deeper into Bayer’s key metrics by checking this interactive graph of Bayer’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 or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Bayer’s TSR for the last 5 years was -28%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Bayer provided a TSR of 14% over the last twelve months. But that return falls short of the market. On the bright side, that’s still a gain, and it is certainly better than the yearly loss of about 6.4% endured over half a decade. It could well be that the business is stabilizing. Importantly, we haven’t analysed Bayer’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.