Tuesday, December 3, 2024

RHÖN-KLINIKUM (ETR:RHK) shareholders have endured a 31% loss from investing in the stock five years ago

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While it may not be enough for some shareholders, we think it is good to see the RHÖN-KLINIKUM Aktiengesellschaft (ETR:RHK) share price up 12% in a single quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 31%, which falls well short of the return you could get by buying an index fund.

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

See our latest analysis for RHÖN-KLINIKUM

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

While the share price declined over five years, RHÖN-KLINIKUM actually managed to increase EPS by an average of 2.2% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

By glancing at these numbers, we’d posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what’s going on with the stock by looking at other metrics.

We don’t think that the 1.2% is big factor in the share price, since it’s quite small, as dividends go. Revenue is actually up 4.2% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

XTRA:RHK Earnings and Revenue Growth November 30th 2024

It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for RHÖN-KLINIKUM in this interactive graph of future profit estimates.

It’s nice to see that RHÖN-KLINIKUM shareholders have received a total shareholder return of 16% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 5% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Before forming an opinion on RHÖN-KLINIKUM you might want to consider these 3 valuation metrics.

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