ElringKlinger (ETR:ZIL2) investors are sitting on a loss of 51% if they invested three years ago

It is a pleasure to report that the ElringKlinger AG (ETR:ZIL2) is up 32% in the last quarter. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 53% in that time. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for ElringKlinger

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

During five years of share price growth, ElringKlinger moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

We note that, in three years, revenue has actually grown at a 7.7% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating ElringKlinger further; while we may be missing something on this analysis, there might also 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).

earnings-and-revenue-growth

We know that ElringKlinger has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on ElringKlinger

A Different Perspective

ElringKlinger shareholders are down 27% for the year (even including dividends), but the market itself is up 3.5%. 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. Longer term investors wouldn't be so upset, since they would have made 1.0%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand ElringKlinger better, we need to consider many other factors. Even so, be aware that ElringKlinger is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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