Gateway Real Estate AG (ETR:GTY) shareholders will doubtless be very grateful to see the share price up 30% in the last quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 80%. So we don’t gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Gateway Real Estate
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Looking back five years, both Gateway Real Estate’s share price and EPS declined; the latter at a rate of 35% per year. The impact of extraordinary items helps explain this. This fall in the EPS is worse than the 27% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 178.49 suggests that shareholders believe earnings will grow in the years ahead.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Gateway Real Estate’s earnings, revenue and cash flow.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Gateway Real Estate’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Gateway Real Estate’s TSR, which was a 77% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Investors in Gateway Real Estate had a tough year, with a total loss of 76%, against a market gain of about 7.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. To that end, you should learn about the 5 warning signs we’ve spotted with Gateway Real Estate (including 2 which shouldn’t be ignored) .
We will like Gateway Real Estate better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.