Volatility 101: Should Fortuna Silver Mines (TSE:FVI) Shares Have Dropped 21%?

While not a mind-blowing move, it is good to see that the Fortuna Silver Mines Inc. (TSE:FVI) share price has gained 11% in the last three months. But that doesn’t change the reality of under-performance over the last twelve months. In fact the stock is down 21% in the last year, well below the market return.

View our latest analysis for Fortuna Silver Mines

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 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.

Unhappily, Fortuna Silver Mines had to report a 49% decline in EPS over the last year. This fall in the EPS is significantly worse than the 21% the share price fall. So the market may not be too worried about the EPS figure, at the moment — or it may have expected earnings to drop faster.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:FVI Past and Future Earnings, March 20th 2019
TSX:FVI Past and Future Earnings, March 20th 2019

It is of course excellent to see how Fortuna Silver Mines has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Fortuna Silver Mines shareholders are down 21% for the year, but the market itself is up 4.1%. 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. Longer term investors wouldn’t be so upset, since they would have made 3.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is Fortuna Silver Mines cheap compared to other companies? These 3 valuation measures might help you decide.

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.