Stabilus' (ETR:STM) earnings have declined over year, contributing to shareholders 47% loss

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Stabilus SE (ETR:STM) have tasted that bitter downside in the last year, as the share price dropped 49%. That contrasts poorly with the market return of 20%. Notably, shareholders had a tough run over the longer term, too, with a drop of 38% in the last three years. But it's up 7.6% in the last week.

The recent uptick of 7.6% could be a positive sign of things to come, so let's take a look at historical fundamentals.

Check out our latest analysis for Stabilus

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.

Unfortunately Stabilus reported an EPS drop of 26% for the last year. This reduction in EPS is not as bad as the 49% share price fall. So it seems the market was too confident about the business, a year ago. The P/E ratio of 10.61 also points to the negative market sentiment.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Stabilus' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Stabilus' TSR for the last 1 year was -47%, 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

While the broader market gained around 20% in the last year, Stabilus shareholders lost 47% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.1% 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. 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. Even so, be aware that Stabilus is showing 3 warning signs in our investment analysis , you should know about...

We will like Stabilus 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.

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

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.