Siemens (ETR:SIE) investors are sitting on a 14% loss if they had invested a year ago
The easiest way to take advantage of a bull market is to buy an index fund. But if you buy individual stocks, you can do better or worse than that. Investors in Siemens Aktiengesellschaft (ETR:SIE) have tasted this bitter downside over the past year, with the stock price dropping 16%. This is disappointing considering that the market is down 8.0%. The silver lining (for longer-term investors) is that the stock is still 9.9% higher than it was three years ago. In the last ninety days, we have seen the stock price drop by 20%. However, one could say that the price was influenced by the general market, which is down 12% over the same period.
So let’s take a look and see if the long-term performance of the business has been in line with the progress of the underlying business.
Discover our latest analysis for Siemens
In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. By comparing earnings per share (EPS) and share price changes over time, we can get an idea of how investors’ attitudes toward a company change over time.
Even though Siemens’ share price is down over the year, its EPS has actually improved. It could be that the share price was previously overhyped.
The divergence between EPS and share price is quite noticeable over the year. It is therefore worth checking other measurements as well.
Siemens has managed to increase its revenue over the past year, which is usually a real plus. Since we cannot easily explain the stock price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how earnings and income have changed over time below (find out the exact values by clicking on the image).
Siemens is a well-known stock, with wide analyst coverage, which suggests some visibility on future growth. Since we have quite a number of analyst forecasts, it might be worth checking this out. free chart illustrating consensus estimates.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. It turns out that Siemens’ TSR for the past year was -14%, which exceeds the previously mentioned stock price return. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
While the broader market lost around 8.0% in the twelve months, Siemens shareholders fared even worse, losing 14% (even including dividends). That said, it is 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, as they would have gained 4%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we found 2 warning signs for Siemens (1 is a bit worrying!) which you should be aware of before investing here.
We’ll like Siemens better if we see big insider buying. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on DE exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.