Deutsche Pfandbriefbank's (ETR:PBB) earnings have declined over five years, contributing to shareholders 44% loss

It's nice to see the Deutsche Pfandbriefbank AG (ETR:PBB) share price up 11% in a week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 62%, 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.

See our latest analysis for Deutsche Pfandbriefbank

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years over which the share price declined, Deutsche Pfandbriefbank's earnings per share (EPS) dropped by 10% each year. This reduction in EPS is less than the 17% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 5.13 further reflects this reticence.

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

This free interactive report on Deutsche Pfandbriefbank's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Deutsche Pfandbriefbank, it has a TSR of -44% 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

Deutsche Pfandbriefbank shareholders are down 50% for the year (even including dividends), but the market itself is up 4.3%. 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 8% 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. It's always interesting to track share price performance over the longer term. But to understand Deutsche Pfandbriefbank better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Deutsche Pfandbriefbank you should know about.

We will like Deutsche Pfandbriefbank better if we see some big insider buys. While we wait, check out this free list of growing companies 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.