It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of ASA International Group PLC (LON:ASAI); the share price is down a whopping 74% in the last three years. That would certainly shake our confidence in the decision to own the stock. And more recent buyers are having a tough time too, with a drop of 40% in the last year. The falls have accelerated recently, with the share price down 19% in the last three months.
If the past week is anything to go by, investor sentiment for ASA International Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
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. 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.
ASA International Group saw its EPS decline at a compound rate of 83% per year, over the last three years. This fall in the EPS is worse than the 36% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on ASA International Group's earnings, revenue and cash flow.
A Different Perspective
The last twelve months weren't great for ASA International Group shares, which cost holders 40%, while the market was up about 10.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 20% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with ASA International Group (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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. 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.