Südwestdeutsche Salzwerke (FRA:SSH) shareholders have lost 21% over 1 year, earnings decline likely the culprit

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Südwestdeutsche Salzwerke AG (FRA:SSH) have tasted that bitter downside in the last year, as the share price dropped 22%. That contrasts poorly with the market decline of 1.5%. However, the longer term returns haven't been so bad, with the stock down 2.7% in the last three years. And the share price decline continued over the last week, dropping some 8.3%.

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

See our latest analysis for Südwestdeutsche Salzwerke

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Südwestdeutsche Salzwerke had to report a 98% decline in EPS over the last year. Readers should not this outcome was influenced by the impact of extraordinary items on EPS. This fall in the EPS is significantly worse than the 22% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 833.19, it's fair to say the market sees an EPS rebound on the cards.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Südwestdeutsche Salzwerke shareholders are down 21% for the year (even including dividends), but the market itself is up 1.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Südwestdeutsche Salzwerke (of which 2 are concerning!) you should know about.

But note: Südwestdeutsche Salzwerke may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.