Cairn Homes'(LON:CRN) Share Price Is Down 52% Over The Past Three Years.

Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Cairn Homes plc (LON:CRN) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 52% drop in the share price over that period. The more recent news is of little comfort, with the share price down 31% in a year. On top of that, the share price is down 11% in the last week.

View our latest analysis for Cairn Homes

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Cairn Homes moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

Revenue is actually up 40% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Cairn Homes further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market lost about 4.2% in the twelve months, Cairn Homes shareholders did even worse, losing 31%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. 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. 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. For example, we've discovered 2 warning signs for Cairn Homes (1 shouldn't be ignored!) that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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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. 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.
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