AB Electrolux's (STO:ELUX B) earnings trajectory could turn positive as the stock ascends 7.0% this past week

We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the AB Electrolux (publ) (STO:ELUX B) share price dropped 72% in the last half decade. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 29%. But it's up 7.0% in the last week.

The recent uptick of 7.0% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

AB Electrolux 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.

In contrast to the share price, revenue has actually increased by 3.0% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling AB Electrolux stock, you should check out this free report showing analyst profit forecasts.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between AB Electrolux's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that AB Electrolux's TSR, which was a 66% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market gained around 7.6% in the last year, AB Electrolux shareholders lost 29%. 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. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for AB Electrolux (of which 1 is a bit concerning!) you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies 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 Swedish 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.