Stadler Rail (VTX:SRAIL) shareholders have lost 6.9% over 3 years, earnings decline likely the culprit

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Stadler Rail AG (VTX:SRAIL) shareholders, since the share price is down 13% in the last three years, falling well short of the market return of around 24%.

With the stock having lost 4.9% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Stadler Rail

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. 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.

Stadler Rail saw its EPS decline at a compound rate of 17% per year, over the last three years. This fall in the EPS is worse than the 5% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 48.15.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth

Dive deeper into Stadler Rail's key metrics by checking this interactive graph of Stadler Rail's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Stadler Rail's TSR for the last 3 years was -6.9%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Pleasingly, Stadler Rail's total shareholder return last year was 4.8%. That includes the value of the dividend. This recent result is much better than the 2.2% drop suffered by shareholders each year (on average) over the last three. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. It's always interesting to track share price performance over the longer term. But to understand Stadler Rail better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Stadler Rail , and understanding them should be part of your investment process.

Of course Stadler Rail may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss 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.

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