Knorr-Bremse (ETR:KBX) shareholders suffered a 32% loss investing in the stock a year ago

The easiest way to take advantage of a bull market is to buy an index fund. When you buy individual stocks, you can earn higher profits, but you also run the risk of underperformance. This downside risk was materialized by Knorr-Bremse Aktiengesellschaft (ETR:KBX) shareholders over the past year, with the share price down 33%. This is significantly lower than the market decline of around 7.8%. To make matters worse, the three-year returns were also very disappointing (the share price is 32% lower than three years ago). The falls have accelerated recently, with the stock price falling 22% in the past three months. However, one could argue that the price was influenced by the general market, which is down 9.9% over the same period.

With that in mind, it’s worth seeing whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.

Check out our latest analysis for Knorr-Bremse

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. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.

Even though Knorr-Bremse’s share price is down over the year, its EPS has actually improved. It is entirely possible that growth expectations have been unreasonable in the past.

It’s fair to say that the stock price doesn’t seem to reflect EPS growth. It is therefore easy to justify a look at other measures.

Knorr-Bremse has managed to increase its revenue over the past year, which is usually a real plus. Since the fundamentals do not easily explain the stock price drop, there could be an opportunity if the market has overreacted.

You can see how earnings and income have changed over time below (find out the exact values ​​by clicking on the image).

XTRA: KBX Earnings and Revenue Growth April 23, 2022

We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. If you are considering buying or selling Knorr-Bremse shares, you should check out this free report showing analyst earnings forecast.

A different perspective

Knorr-Bremse’s shareholding is down 32% over the year (even including dividends), below the market return. Meanwhile, the broader market slipped around 7.8%, likely weighing on the stock. The loss of 9% per year over three years is not as bad as the last twelve months, which suggests that the company has not been able to convince the market that it has solved its problems. Although Baron Rothschild said “buy when there is blood in the streets, even if the blood is yours”, he also focuses on high quality stocks with strong prospects. It is always interesting to follow the evolution of the share price over the long term. But to better understand Knorr-Bremse, we need to consider many other factors. Take risks, for example – Knorr-Bremse has 2 warning signs we think 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.

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