Fresenius Medical Care AG (ETR:FME) shareholders will be happy to see the share price up 15% in the last month. But if you look at the past five years, the returns haven’t been that good. Stock prices have fallen 47% over the last 50 years, so you should have bought an index fund.
Long-term shareholders are still in the red even though the stock price has risen 14% over the past week, but let’s take a look at what the fundamentals tell us.
Check out our latest analysis for Fresenius Medical Care.
in his essay Graham & Doddsville SuperInvestors Warren Buffett explained that stock prices do not always rationally reflect the value of a company. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
Looking back over five years, Fresenius Medical Care’s share price and EPS have both declined. The latter occurs at a rate of 23% per year. The 12% annual share price decline isn’t as bad as the EPS decline. The relatively muted reaction in stock prices may be because the market expects business to improve.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend taking a closer look at its historical growth trends, available here.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. For Fresenius Medical Care, the TSR for the last 5 years is -41%. This exceeds the stock return mentioned earlier. And there’s no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
Fresenius Medical Care shareholders are down 3.8% for the year (including dividends), while the market itself is up 6.0%. Even blue-chip stocks can see their share prices drop from time to time, and we like to see improvement in a company’s fundamental metrics before we get too interested. Unfortunately, long-term shareholders are suffering even more, given the 7% loss over the last five years. Before we can gather much enthusiasm, we need to see continued improvement in key metrics. I think it’s very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. Still, take note of what Fresenius Medical Care shows. 1 warning sign in investment analysis you should know…
If you want to check out another company with potentially better financials, don’t miss this free A list of companies that have proven they can grow their revenue.
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 using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
