Stock Analysis

Despite delivering investors losses of 24% over the past 5 years, Wacker Neuson (ETR:WAC) has been growing its earnings

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XTRA:WAC
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Wacker Neuson SE (ETR:WAC) shareholders should be happy to see the share price up 17% in the last month. But if you look at the last five years the returns have not been good. In fact, the share price is down 34%, which falls well short of the return you could get by buying an index fund.

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.

Check out the opportunities and risks within the DE Machinery industry.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate half decade during which the share price slipped, Wacker Neuson actually saw its earnings per share (EPS) improve by 12% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
XTRA:WAC Earnings and Revenue Growth December 6th 2022

We know that Wacker Neuson has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Wacker Neuson stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Wacker Neuson, it has a TSR of -24% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Wacker Neuson shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. 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 Wacker Neuson better, we need to consider many other factors. Take risks, for example - Wacker Neuson has 1 warning sign we think you should be aware of.

Of course Wacker Neuson 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 DE exchanges.

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