Dermapharm Holding (ETR:DMP) sheds €70m, company earnings and investor returns have been trending downwards for past three years

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Dermapharm Holding SE (ETR:DMP) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 64% in that time. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.

Since Dermapharm Holding has shed €70m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Dermapharm Holding

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Dermapharm Holding saw its EPS decline at a compound rate of 12% per year, over the last three years. The share price decline of 29% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It might be well worthwhile taking a look at our free report on Dermapharm Holding'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. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Dermapharm Holding the TSR over the last 3 years was -61%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 23% in the last year, Dermapharm Holding shareholders lost 13% (even including dividends). 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 0.3% 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. It's always interesting to track share price performance over the longer term. But to understand Dermapharm Holding better, we need to consider many other factors. Even so, be aware that Dermapharm Holding is showing 3 warning signs in our investment analysis , and 1 of those is potentially serious...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.