Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Pestech International Berhad (KLSE:PESTECH) for five whole years - as the share price tanked 80%. And it's not just long term holders hurting, because the stock is down 32% in the last year. And the share price decline continued over the last week, dropping some 17%. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Since Pestech International Berhad has shed RM49m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Pestech International Berhad
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.
Over five years Pestech International Berhad's earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Pestech International Berhad's key metrics by checking this interactive graph of Pestech International Berhad's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 4.3% in the last year, Pestech International Berhad shareholders lost 32%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Pestech International Berhad (of which 3 are a bit unpleasant!) you should know about.