Reflecting on Lenzing's (VIE:LNZ) Share Price Returns Over The Last Three Years

Investing in stocks inevitably means buying into some companies that perform poorly. But long term Lenzing Aktiengesellschaft (VIE:LNZ) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 70% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 54% in the last year. The falls have accelerated recently, with the share price down 11% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Check out our latest analysis for Lenzing

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Lenzing's earnings per share (EPS) dropped by 45% each year. This fall in the EPS is worse than the 33% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Lenzing's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Lenzing's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Lenzing shareholders, and that cash payout explains why its total shareholder loss of 67%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

We regret to report that Lenzing shareholders are down 54% for the year. Unfortunately, that's worse than the broader market decline of 21%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.5% over the last half decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Lenzing is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

We will like Lenzing better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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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. 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.
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