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The past five years for Fresenius Medical Care KGaA (ETR:FME) investors have not been profitable

We believe smart long-term investing is the way to go. But that doesn’t mean long-term investors can avoid big losses. For example the Fresenius Medical Care AG & Co. KGaA (ETR:FME) stock price has fallen 65% in five years. We certainly feel for shareholders who bought near the top. And it’s not just long-term holders who are hurting, as the stock has fallen 52% in the past year. Moreover, it fell by 40% in about a quarter. It’s not much fun for the holders.

So let’s take a look and see if the company’s long-term performance has been in line with the progress of the underlying business.

However, if you’re not interested in researching what drove FME’s performance, we have a free list of interesting investment ideas to potentially inspire your next investment!

It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. 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.

Looking back five years, Fresenius Medical Care KGaA’s share price and EPS have fallen; the latter at the rate of 7.5% per year. This EPS reduction is less than the 19% annual reduction in share price. This implies that the market was previously too bullish on the stock. The low P/E ratio of 10.32 further reflects this reluctance.

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

XTRA:FME Earnings per share growth October 6, 2022

Dive deeper into Fresenius Medical Care KGaA’s key metrics by viewing this interactive chart of Fresenius Medical Care KGaA’s earnings, revenue and cash flow.

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, on the basis of 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 Fresenius Medical Care KGaA’s TSR for the past 5 years was -62%, which exceeds the share price return mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.

A different perspective

While the broader market lost around 21% in the twelve months, Fresenius Medical Care KGaA shareholders fared even worse, losing 51% (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. Unfortunately, last year’s performance capped a bad patch, with shareholders facing a total loss of 10% per year over five years. Generally speaking, long-term stock price weakness can be a bad sign, although contrarian investors may want to seek out the stock in hopes of a turnaround. It is always interesting to follow the evolution of the share price over the long term. But to better understand Fresenius Medical Care KGaA, we need to consider many other factors. Nevertheless, be aware that Fresenius Medical Care KGaA shows 1 warning sign in our investment analysis you should know…

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on DE exchanges.

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.

Valuation is complex, but we help make it simple.

Find out if Fresenius Medical Care KGaA is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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