Shareholders in Appen (ASX:APX) have lost 89%, as stock drops 15% this past week

As every investor would know, not every swing hits the sweet spot. But really big losses can really drag down an overall portfolio. So take a moment to sympathize with the long term shareholders of Appen Limited (ASX:APX), who have seen the share price tank a massive 89% over a three year period. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 68% lower in that time. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

If the past week is anything to go by, investor sentiment for Appen isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Appen

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over the three years that the share price declined, Appen's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Appen's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Appen shareholders are down 68% for the year, but the market itself is up 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. We realise that Baron Rothschild 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 business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

We will like Appen better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.