AMAG Austria Metall (VIE:AMAG) earnings and shareholder returns have been trending downwards for the last three years, but the stock climbs 6.1% this past week

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term AMAG Austria Metall AG (VIE:AMAG) shareholders have had that experience, with the share price dropping 39% in three years, versus a market decline of about 4.7%. On the other hand the share price has bounced 6.1% over the last week.

The recent uptick of 6.1% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for AMAG Austria Metall

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 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.

AMAG Austria Metall saw its EPS decline at a compound rate of 4.6% per year, over the last three years. This reduction in EPS is slower than the 15% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into AMAG Austria Metall's key metrics by checking this interactive graph of AMAG Austria Metall's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for AMAG Austria Metall the TSR over the last 3 years was -30%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 6.6% in the last year, AMAG Austria Metall shareholders lost 3.6% (even including dividends). 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% 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. It's always interesting to track share price performance over the longer term. But to understand AMAG Austria Metall better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for AMAG Austria Metall you should be aware of, and 1 of them is significant.

But note: AMAG Austria Metall may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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