Stadler Rail (VTX:SRAIL) earnings and shareholder returns have been trending downwards for the last five years, but the stock ascends 3.3% this past week

While it may not be enough for some shareholders, we think it is good to see the Stadler Rail AG (VTX:SRAIL) share price up 13% in a single quarter. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 51% in that half decade.

On a more encouraging note the company has added CHF70m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years over which the share price declined, Stadler Rail's earnings per share (EPS) dropped by 21% each year. The share price decline of 13% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. The high P/E ratio of 57.53 suggests that shareholders believe earnings will grow in the years ahead.

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

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. 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 -44% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Stadler Rail had a tough year, with a total loss of 20% (including dividends), against a market gain of about 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Stadler Rail , and understanding them should be part of your investment process.

Of course Stadler Rail may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.