Investing in Baader Bank (ETR:BWB) five years ago would have delivered you a 304% gain

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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Baader Bank Aktiengesellschaft (ETR:BWB) stock is up an impressive 257% over the last five years. It’s also good to see the share price up 26% over the last quarter.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

Check out our latest analysis for Baader Bank

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.

During the five years of share price growth, Baader Bank moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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 Baader Bank’s key metrics by checking this interactive graph of Baader Bank’s earnings, revenue and cash flow.

A Dividend Lost

The share price return figures discussed above don’t include the value of dividends paid previously, but the total shareholder return (TSR) does. In some ways, TSR is a better measure of how well an investment has performed. Baader Bank’s TSR over the last 5 years is 304%; better than its share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.

A Different Perspective

Investors in Baader Bank had a tough year, with a total loss of 0.6%, against a market gain of about 6.7%. 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. Longer term investors wouldn’t be so upset, since they would have made 32%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It’s always interesting to track share price performance over the longer term. But to understand Baader Bank better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Baader Bank .

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.