Further weakness as Dürr (ETR:DUE) drops 4.2% this week, taking three-year losses to 33%

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Dürr Aktiengesellschaft (ETR:DUE) shareholders, since the share price is down 38% in the last three years, falling well short of the market decline of around 9.4%. The more recent news is of little comfort, with the share price down 32% in a year. More recently, the share price has dropped a further 18% in a month.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

View our latest analysis for Dürr

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Dürr became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

Revenue is actually up 13% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Dürr further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Dürr is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Dürr's TSR for the last 3 years was -33%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Dürr shareholders are down 30% for the year (even including dividends), but the market itself is up 6.2%. 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 4% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Dürr that you should be aware of before investing here.

We will like Dürr better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com