Investors five-year losses continue as WASGAU Produktions & Handels (FRA:MSH) dips a further 11% this week, earnings continue to decline

For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term WASGAU Produktions & Handels AG (FRA:MSH) shareholders for doubting their decision to hold, with the stock down 38% over a half decade. The falls have accelerated recently, with the share price down 12% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Looking back five years, both WASGAU Produktions & Handels' share price and EPS declined; the latter at a rate of 5.0% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 9% per year, over the period. This implies that the market was previously too optimistic about the stock.

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

This free interactive report on WASGAU Produktions & Handels' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, WASGAU Produktions & Handels' TSR for the last 5 years was -34%, 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

WASGAU Produktions & Handels shareholders are down 8.4% for the year (even including dividends), but the market itself is up 21%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. 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 WASGAU Produktions & Handels better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for WASGAU Produktions & Handels (of which 3 shouldn't be ignored!) you should know about.

We will like WASGAU Produktions & Handels 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.