The five-year loss for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) shareholders likely driven by its shrinking earnings

By
Simply Wall St
Published
August 25, 2021
DB:BLH
Source: Shutterstock

It's nice to see the BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (FRA:BLH) share price up 10% in a week. But that doesn't change the fact that the returns over the last five years have been less than pleasing. You would have done a lot better buying an index fund, since the stock has dropped 26% in that half decade.

On a more encouraging note the company has added €4.2m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During the five years over which the share price declined, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s earnings per share (EPS) dropped by 8.1% each year. The share price decline of 6% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

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

earnings-per-share-growth
DB:BLH Earnings Per Share Growth August 26th 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877-'s TSR for the last 5 years was -16%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- shareholders are down 7.6% for the year (even including dividends), but the market itself is up 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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. It's always interesting to track share price performance over the longer term. But to understand BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for BREMER LAGERHAUS-GESELLSCHAFT -Aktiengesellschaft von 1877- (of which 2 shouldn't be ignored!) you should know about.

For those who like to find winning investments this free list of growing 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 DE exchanges.

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