Merck KGaA (ETR:MRK) shareholders have endured a 33% loss from investing in the stock a year ago

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Merck KGaA (ETR:MRK) share price slid 34% over twelve months. That's disappointing when you consider the market returned 19%. Zooming out, the stock is down 29% in the last three years. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the unfortunate twelve months during which the Merck KGaA share price fell, it actually saw its earnings per share (EPS) improve by 3.4%. Of course, the situation might betray previous over-optimism about growth.

It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.

Given the yield is quite low, at 1.9%, we doubt the dividend can shed much light on the share price. Revenue was fairly steady year on year, which isn't usually such a bad thing. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

Merck KGaA is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Merck KGaA will earn in the future (free analyst consensus estimates)

A Different Perspective

Merck KGaA shareholders are down 33% for the year (even including dividends), but the market itself is up 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. 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. Before forming an opinion on Merck KGaA you might want to consider these 3 valuation metrics.

Of course Merck KGaA may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.