Taking the occasional loss comes part and parcel with investing on the stock market. And there’s no doubt that Prabhat Dairy Limited (NSE:PRABHAT) stock has had a really bad year. To wit the share price is down 61% in that time. However, the longer term returns haven’t been so bad, with the stock down 28% in the last three years. The falls have accelerated recently, with the share price down 11% in the last three months. Of course, this share price action may well have been influenced by the 8.1% decline in the broader market, throughout the period.
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.
Unhappily, Prabhat Dairy had to report a 75% decline in EPS over the last year. This fall in the EPS is significantly worse than the 61% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
This free interactive report on Prabhat Dairy’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren’t great for Prabhat Dairy shares, which performed worse than the market, costing holders 61%. The market shed around 13%, no doubt weighing on the stock price. The three-year loss of 10% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before forming an opinion on Prabhat Dairy you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of growing 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 IN exchanges.
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