Five-year shareholder returns and company earnings persist lower as Ontex Group shares (EBR: ONTEX) fall another 13% last week

We are definitely into investing for the long term, but some companies are just plain bad investments all the time. It hits us in the stomach when we see other investors taking a loss. Imagine if you held Ontex Group SA (EBR: ONTEX) for half a decade as the share price fell 75%. We also note that the stock has performed poorly over the past year, with the share price down 36%. In addition, it has fallen by 25% in about a quarter. It’s not a lot of fun for the holders.

Since the past week has been a tough one for shareholders, let’s take a look at the fundamentals and see what we can learn.

Check out our latest analysis for the Ontex group

In his essay Graham-and-Doddsville super-investors Warren Buffett described how stock prices don’t always rationally reflect a company’s value. By comparing earnings per share (EPS) and changes in stock prices over time, we can get a sense of how investors’ attitudes towards a company have changed over time.

In the five years that the stock price fell, Ontex Group’s earnings per share (EPS) fell 29% each year. In particular, the share price has fallen by 24% per year, quite close to the evolution of EPS. This suggests that the sentiment of the market around the company has not changed much during this time. On the contrary, the stock price roughly followed the growth of BPA.

The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).

ENXTBR: ONTEX Growth in earnings per share December 19, 2021

We are happy to report that the CEO is paid more modestly than most CEOs of similar capitalization companies. But while CEO compensation is still worth checking out, the really important question is whether the company can increase profits in the future. Dive deeper into profits by checking out this interactive graph of Ontex Group earnings, revenue and cash flow.

A different perspective

Ontex group shareholders are down 36% for the year, but the market itself is up 13%. Even good stock prices drop sometimes, but we want to see improvements in the fundamentals of a business, before we get too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the 12% annualized loss over the past five years. Generally speaking, long-term weakness in stock prices can be a bad sign, although contrarian investors may want to seek the stock in hopes of a rally. I find it very interesting to look at the stock price over the long term as an indicator of company performance. But to really understand better, we have to take other information into account as well. Take risks, for example – Ontex Group has 4 warning signs (and 1 which makes us a little uncomfortable) we think you should be aware of.

Sure, you might find a fantastic investment 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 market-weighted average returns of stocks currently traded on the BE exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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