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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the FamiCord AG (ETR:V3V) share price dropped 67% in the last half decade. That's not a lot of fun for true believers.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, FamiCord 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 35% 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.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how FamiCord has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at FamiCord's financial health with this free report on its balance sheet.
A Different Perspective
FamiCord shareholders are down 17% for the year, but the market itself is up 16%. 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, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand FamiCord better, we need to consider many other factors. Take risks, for example - FamiCord has 3 warning signs (and 1 which can't be ignored) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).