The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn’t blame National Steel and Agro Industries Limited (NSE:NATNLSTEEL) shareholders if they were still in shock after the stock dropped like a lead balloon, down 83% in just one year. That’d be enough to make even the strongest stomachs churn. To make matters worse, the returns over three years have also been really disappointing (the share price is 57% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the last year National Steel and Agro Industries saw its earnings per share drop below zero. While this may prove temporary, we’d consider it a negative, so it doesn’t surprise us that the stock price is down. Of course, if the company can turn the situation around, investors will likely profit.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on National Steel and Agro Industries’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
National Steel and Agro Industries shareholders are down 83% for the year (even including dividends), 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN 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 firstname.lastname@example.org. 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.