Volatility 101: Should Pittler Maschinenfabrik Shares Have Dropped 11%?

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The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Pittler Maschinenfabrik AG (FRA:PIT), since the last five years saw the share price fall 11%.

See our latest analysis for Pittler Maschinenfabrik

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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 five years over which the share price declined, Pittler Maschinenfabrik’s earnings per share (EPS) dropped by 22% each year. The share price decline of 2.3% per year isn’t as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

DB:PIT Past and Future Earnings, February 22nd 2019
DB:PIT Past and Future Earnings, February 22nd 2019

Dive deeper into the earnings by checking this interactive graph of Pittler Maschinenfabrik’s earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We’d be remiss not to mention the difference between Pittler Maschinenfabrik’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. We note that Pittler Maschinenfabrik’s TSR, at -4.5% is higher than its share price rise of -11%. When you consider it hasn’t been paying a dividend, this data suggests shareholders may have had the opportunity to acquire attractively priced shares in the business.

A Different Perspective

Although it hurts that Pittler Maschinenfabrik returned a loss of 3.5% in the last twelve months, the broader market was actually worse, returning a loss of 8.5%. Given the total loss of 0.9% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Warren Buffett does say to ‘buy when there is blood on the streets’, buyers would need to examine the data carefully to be comfortable that the business itself is sound. Before forming an opinion on Pittler Maschinenfabrik you might want to consider these 3 valuation metrics.

Of course Pittler Maschinenfabrik 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.