In This Article:
Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. Anyone who held IG Design Group plc (LON:IGR) for five years would be nursing their metaphorical wounds since the share price dropped 90% in that time. And it's not just long term holders hurting, because the stock is down 55% in the last year. Furthermore, it's down 64% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, IG Design Group moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
Revenue is actually up 3.6% 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).
We know that IG Design Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling IG Design Group stock, you should check out this free report showing analyst profit forecasts .
A Different Perspective
Investors in IG Design Group had a tough year, with a total loss of 55%, against a market gain of about 1.2%. 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 annualised loss of 14% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for IG Design Group (2 are significant!) that you should be aware of before investing here.