Even after rising 23% this past week, Grammer (ETR:GMM) shareholders are still down 74% over the past five years

It's nice to see the Grammer AG (ETR:GMM) share price up 23% in a week. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Five years have seen the share price descend precipitously, down a full 74%. So we don't gain too much confidence from the recent recovery. The important question is if the business itself justifies a higher share price in the long term.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Grammer

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

Grammer has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

In contrast to the share price, revenue has actually increased by 4.7% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

This free interactive report on Grammer's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 12% in the last year, Grammer shareholders lost 30%. 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 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Grammer better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Grammer (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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