Deutsche Wohnen (ETR:DWNI) shareholders are up 5.4% this past week, but still in the red over the last three years

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Deutsche Wohnen SE (ETR:DWNI) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 63% share price collapse, in that time.

The recent uptick of 5.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for Deutsche Wohnen

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.

We know that Deutsche Wohnen has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

With a rather small yield of just 0.2% we doubt that the stock's share price is based on its dividend. We think that the revenue decline over three years, at a rate of 23% per year, probably had some shareholders looking to sell. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Deutsche Wohnen stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Investors in Deutsche Wohnen had a tough year, with a total loss of 11% (including dividends), against a market gain of about 1.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Deutsche Wohnen .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com