Lydall, Inc. (NYSE:LDL) shareholders should be happy to see the share price up 12% in the last month. Meanwhile over the last three years the stock has dropped hard. Indeed, the share price is down a tragic 61% in the last three years. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Lydall saw its EPS decline at a compound rate of 43% per year, over the last three years. In comparison the 27% compound annual share price decline isn’t as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 54.77, it’s fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Lydall’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Lydall had a tough year, with a total loss of 3.1%, against a market gain of about 28%. 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 5.1% 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. 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. To that end, you should be aware of the 3 warning signs we’ve spotted with Lydall .
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 US exchanges.
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