Investors three-year losses continue as Salzgitter (ETR:SZG) dips a further 12% this week, earnings continue to decline

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the last three years have been particularly tough on longer term Salzgitter AG (ETR:SZG) shareholders. Unfortunately, they have held through a 53% decline in the share price in that time. The more recent news is of little comfort, with the share price down 46% in a year. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.

After losing 12% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

See our latest analysis for Salzgitter

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 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).

Salzgitter saw its EPS decline at a compound rate of 40% per year, over the last three years. This fall in the EPS is worse than the 23% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Salzgitter the TSR over the last 3 years was -50%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Salzgitter had a tough year, with a total loss of 45% (including dividends), against a market gain of about 17%. 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 2% 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 Salzgitter better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Salzgitter (including 1 which doesn't sit too well with us) .

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.