Yahoo Finance The five-year shareholder returns and company earnings persist lower as Grenke (ETR:GLJ) stock falls a further 7.6% in past week
Long term investing is the way to go, but that doesn't mean you should hold every stock forever. It hits us in the gut when we see fellow investors suffer a loss. Imagine if you held Grenke AG (ETR:GLJ) for half a decade as the share price tanked 77%. Furthermore, it's down 26% in about a quarter. That's not much fun for holders.
With the stock having lost 7.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Grenke
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both Grenke's share price and EPS declined; the latter at a rate of 6.7% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 25% per year, over the period. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 10.93.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Grenke's earnings, revenue and cash flow.
A Different Perspective
Investors in Grenke had a tough year, with a total loss of 1.7% (including dividends), against a market gain of about 14%. 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, longer term shareholders are suffering worse, given the loss of 12% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Grenke better, we need to consider many other factors. Even so, be aware that Grenke is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...
But note: Grenke may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
