Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Wacker Neuson SE (ETR:WAC) share price is down 32% in the last year. That's well bellow the market return of -5.9%. On the other hand, the stock is actually up 23% over three years. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unhappily, Wacker Neuson had to report a 25% decline in EPS over the last year. The share price decline of 32% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 10.81 also points to the negative market sentiment.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Wacker Neuson's key metrics by checking this interactive graph of Wacker Neuson's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Wacker Neuson the TSR over the last year was -29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Wacker Neuson shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 5.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 2.8%, 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. Importantly, we haven't analysed Wacker Neuson's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
If you are like me, then you will not want to miss this free list of growing 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 DE exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.