Investors three-year losses continue as Stadler Rail (VTX:SRAIL) dips a further 8.7% this week, earnings continue to decline

Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Stadler Rail AG (VTX:SRAIL) shareholders have had that experience, with the share price dropping 20% in three years, versus a market return of about 37%. And the share price decline continued over the last week, dropping some 8.7%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

If the past week is anything to go by, investor sentiment for Stadler Rail isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Stadler Rail

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Stadler Rail saw its EPS decline at a compound rate of 5.1% per year, over the last three years. This reduction in EPS is slower than the 7% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Stadler Rail, it has a TSR of -14% for the last 3 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

Stadler Rail shareholders may not have made money over the last year, but their total loss of 7.2% ( including dividends) isn't as bad as the market loss of around 7.2%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's even worse than the annualised loss of 4% over the last three years. Whilst Baron Rothschild does say to "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Stadler Rail (at least 1 which is significant) , and understanding them should be part of your investment process.

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