Forvia (EPA:FRVIA investor five-year losses grow to 78% as the stock sheds €337m this past week

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Anyone who held Forvia SE (EPA:FRVIA) for five years would be nursing their metaphorical wounds since the share price dropped 81% in that time. And some of the more recent buyers are probably worried, too, with the stock falling 62% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 35% in thirty days. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

In the last half decade Forvia saw its share price fall as its EPS declined below zero. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Forvia has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Forvia stock, you should check out this FREE detailed report on its balance sheet .

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Forvia's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Forvia's TSR of was a loss of 78% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 9.4% in the twelve months, Forvia shareholders did even worse, losing 61%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Forvia , and understanding them should be part of your investment process.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French 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.