Investors one-year losses continue as COSOL (ASX:COS) dips a further 13% this week, earnings continue to decline

Investing in stocks comes with the risk that the share price will fall. Anyone who held COSOL Limited (ASX:COS) over the last year knows what a loser feels like. The share price has slid 58% in that time. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 6.5% in three years. The falls have accelerated recently, with the share price down 38% in the last three months.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

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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).

Unfortunately COSOL reported an EPS drop of 6.2% for the last year. This reduction in EPS is not as bad as the 58% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business. The P/E ratio of 10.18 also points to the negative market sentiment.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into COSOL's key metrics by checking this interactive graph of COSOL's earnings, revenue and cash flow.

A Different Perspective

Investors in COSOL had a tough year, with a total loss of 57% (including dividends), against a market gain of about 13%. 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. On the bright side, long term shareholders have made money, with a gain of 3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that COSOL is showing 2 warning signs in our investment analysis , you should know about...

But note: COSOL may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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