Bayer investors (ETR: BAYN) are sitting on a 37% loss if they had invested five years ago

For many, the primary goal of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both outperforming and underperforming stocks. At this point, some shareholders may question their investment in Bayer Aktiengesellschaft (ETR: BAYN), over the past five years, the stock price has fallen 48%.

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

See our latest analysis for Bayer

While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just the underlying performance of the company. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.

We know that Bayer has been profitable in the past. However, it has recorded a loss over the past twelve months, which suggests that profit may be an unreliable measure at this point. Other metrics could give us a better idea of ​​how its value has changed over time.

The most recent dividend was actually lower than it was in the past, which may have pushed the stock price down.

The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).

Bayer is well known to investors, and many smart analysts have attempted to predict future profit levels. Considering we have a good number of analyst forecasts, it might be worth checking this out. free graph showing consensus estimates.

What about dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin- off updated. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. Note that for Bayer the TSR over the last 5 years was -37%, which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total shareholder return.

A different perspective

While the broader market gained around 31% last year, Bayer shareholders lost 9.7% (including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the 6% 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. While it is worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we discovered 2 warning signs for Bayer (1 is significant!) That you should know before investing here.

But beware : Bayer may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

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

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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 shares 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 the mentioned stocks.
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