If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But long term ProCredit Holding AG & Co. KGaA (ETR:PCZ) shareholders have had a particularly rough ride in the last three year. So they might be feeling emotional about the 58% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 46% in the last year. More recently, the share price has dropped a further 23% in a month. However, we note the price may have been impacted by the broader market, which is down 36% in the same time period.
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 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.
During the unfortunate three years of share price decline, ProCredit Holding KGaA actually saw its earnings per share (EPS) improve by 7.8% per year. 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.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that the dividend has declined - a likely contributor to the share price drop. It doesn't seem like the changes in revenue would have impacted the share price much, but a closer inspection of the data might reveal something.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for ProCredit Holding KGaA the TSR over the last 3 years was -54%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The last twelve months weren't great for ProCredit Holding KGaA shares, which performed worse than the market, costing holders 44% , including dividends . Meanwhile, the broader market slid about 25%, likely weighing on the stock. Shareholders have lost 23% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand ProCredit Holding KGaA better, we need to consider many other factors. Even so, be aware that ProCredit Holding KGaA is showing 2 warning signs in our investment analysis , you should know about...
Of course ProCredit Holding KGaA may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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