Shareholders in Heidelberger Druckmaschinen (ETR:HDD) have lost 56%, as stock drops 16% this past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Heidelberger Druckmaschinen Aktiengesellschaft (ETR:HDD) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 56% share price collapse, in that time. The last week also saw the share price slip down another 16%. But this could be related to the soft market, which is down about 7.8% in the same period.

With the stock having lost 16% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

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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. 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 five years of share price growth, Heidelberger Druckmaschinen moved from a loss to profitability. 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 3.8% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Heidelberger Druckmaschinen further; while we may be missing something on this analysis, there might also be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Heidelberger Druckmaschinen has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Heidelberger Druckmaschinen

A Different Perspective

While the broader market gained around 5.0% in the last year, Heidelberger Druckmaschinen shareholders lost 7.5%. 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. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Heidelberger Druckmaschinen better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Heidelberger Druckmaschinen , and understanding them should be part of your investment process.

Of course Heidelberger Druckmaschinen 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 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.