Metro (ETR:B4B shareholders incur further losses as stock declines 8.8% this week, taking five-year losses to 64%

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the Metro AG (ETR:B4B) share price managed to fall 72% over five long years. That's not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 31%. Furthermore, it's down 13% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 8.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Metro

Metro isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Metro saw its revenue increase by 4.7% per year. That's far from impressive given all the money it is losing. It's not so sure that share price crash of 11% per year is completely deserved, but the market is doubtless disappointed. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. A company like this generally needs to produce profits before it can find favour with new investors.

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

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Metro, it has a TSR of -64% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Metro shareholders are down 25% for the year (even including dividends), but the market itself is up 14%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. Take risks, for example - Metro has 2 warning signs (and 1 which is potentially serious) we think you should know about.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.