Polimex-Mostostal (WSE:PXM) shareholders are up 20% this past week, but still in the red over the last five years

By
Simply Wall St
Published
March 22, 2022
WSE:PXM
Source: Shutterstock

Polimex-Mostostal S.A. (WSE:PXM) shareholders should be happy to see the share price up 20% in the last week. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 58% in that time. So we're hesitant to put much weight behind the short term increase. Of course, this could be the start of a turnaround.

The recent uptick of 20% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

Check out our latest analysis for Polimex-Mostostal

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 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.

Polimex-Mostostal became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

Arguably, the revenue drop of 11% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
WSE:PXM Earnings and Revenue Growth March 22nd 2022

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Polimex-Mostostal shareholders are down 32% for the year, but the market itself is up 6.9%. 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 10% over the last half decade. 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. 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. Case in point: We've spotted 2 warning signs for Polimex-Mostostal you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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