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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Archidply Industries Limited (NSE:ARCHIDPLY) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 55% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 38% in the last year. On the other hand the share price has bounced 7.2% over the last week. But this could be related to the strong market, with stocks up around 3.1% in the same time.
View our latest analysis for Archidply Industries
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Archidply Industries's earnings per share (EPS) dropped by 17% each year. This reduction in EPS is slower than the 24% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market gained around 8.4% in the last year, Archidply Industries shareholders lost 38%. 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 4.5% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before forming an opinion on Archidply Industries you might want to consider these 3 valuation metrics.
We will like Archidply Industries better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.