Investing in LIMES Schlosskliniken (ETR:LIK) five years ago would have delivered you a 280% gain

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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of LIMES Schlosskliniken AG (ETR:LIK) stock is up an impressive 280% over the last five years. It's also up 29% in about a month.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, LIMES Schlosskliniken moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on LIMES Schlosskliniken's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
While the broader market gained around 19% in the last year, LIMES Schlosskliniken shareholders lost 0.6%. 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 31%, 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. Before forming an opinion on LIMES Schlosskliniken you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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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