IG Design Group (LON:IGR) sheds US$8.7m, company earnings and investor returns have been trending downwards for past year

By
Simply Wall St
Published
March 17, 2022
AIM:IGR
Source: Shutterstock

Even the best investor on earth makes unsuccessful investments. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So spare a thought for the long term shareholders of IG Design Group plc (LON:IGR); the share price is down a whopping 89% in the last twelve months. A loss like this is a stark reminder that portfolio diversification is important. Notably, shareholders had a tough run over the longer term, too, with a drop of 88% in the last three years. Shareholders have had an even rougher run lately, with the share price down 76% in the last 90 days. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

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

See our latest analysis for IG Design Group

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 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, IG Design Group had to report a 32% decline in EPS over the last year. This reduction in EPS is not as bad as the 89% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 9.20.

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

earnings-per-share-growth
AIM:IGR Earnings Per Share Growth March 17th 2022

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

Investors in IG Design Group had a tough year, with a total loss of 89% (including dividends), against a market gain of about 2.6%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for IG Design Group (of which 2 are concerning!) you should know about.

But note: IG Design Group 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 GB exchanges.

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