Yahoo Finance Investors in Deutsche Pfandbriefbank (ETR:PBB) have unfortunately lost 18% over the last five years
The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Deutsche Pfandbriefbank AG (ETR:PBB) shareholders for doubting their decision to hold, with the stock down 42% over a half decade. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 7.5% in the same timeframe.
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 Deutsche Pfandbriefbank
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the five years over which the share price declined, Deutsche Pfandbriefbank's earnings per share (EPS) dropped by 0.9% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 10% 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 5.03.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Deutsche Pfandbriefbank has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Deutsche Pfandbriefbank's TSR for the last 5 years was -18%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's never nice to take a loss, Deutsche Pfandbriefbank shareholders can take comfort that , including dividends,their trailing twelve month loss of 18% wasn't as bad as the market loss of around 23%. Given the total loss of 3% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Deutsche Pfandbriefbank (at least 1 which is concerning) , and understanding them should be part of your investment process.
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 DE 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.
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