Despite delivering investors losses of 79% over the past 3 years, VIB Vermögen (ETR:VIH1) has been growing its earnings

This week we saw the VIB Vermögen AG (ETR:VIH1) share price climb by 11%. But the last three years have seen a terrible decline. In that time the share price has melted like a snowball in the desert, down 80%. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

While the stock has risen 11% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for VIB Vermögen

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 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.

Although the share price is down over three years, VIB Vermögen actually managed to grow EPS by 11% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that VIB Vermögen has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 8.1% in the last year, VIB Vermögen shareholders lost 49%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with VIB Vermögen (including 2 which shouldn't be ignored) .

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.