Stratec (ETR:SBS) stock falls 11% in past week as three-year earnings and shareholder returns continue downward trend

Stratec SE (ETR:SBS) shareholders should be happy to see the share price up 16% in the last month. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 59% in the last three years. So it's good to see it climbing back up. Perhaps the company has turned over a new leaf.

Since Stratec has shed €64m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for Stratec

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Stratec saw its EPS decline at a compound rate of 21% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 26% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

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

Dive deeper into Stratec's key metrics by checking this interactive graph of Stratec's earnings, revenue and cash flow.

A Different Perspective

Stratec shareholders are down 51% for the year (even including dividends), but the market itself is up 4.6%. 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 3% 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 Stratec better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Stratec you should be aware of, and 1 of them is potentially serious.

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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.