Yahoo Finance Ceconomy's (ETR:CEC) earnings trajectory could turn positive as the stock lifts 7.9% this past week
Ceconomy AG (ETR:CEC) shareholders should be happy to see the share price up 23% in the last quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In that time the share price has delivered a rude shock to holders, who find themselves down 70% after a long stretch. So we're not so sure if the recent bounce should be celebrated. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
On a more encouraging note the company has added €98m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.
See our latest analysis for Ceconomy
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.
Looking back five years, both Ceconomy's share price and EPS declined; the latter at a rate of 11% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 21% per year, over the period. So it seems the market was too confident about the business, in the past. The low P/E ratio of 10.22 further reflects this reticence.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While the broader market lost about 1.5% in the twelve months, Ceconomy shareholders did even worse, losing 16% (even including dividends). 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. For example, we've discovered 5 warning signs for Ceconomy (1 is significant!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 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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