Investors five-year losses continue as Synlait Milk (NZSE:SML) dips a further 11% this week, earnings continue to decline

Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Synlait Milk Limited (NZSE:SML) share price is a whole 67% lower. That's not a lot of fun for true believers. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.

If the past week is anything to go by, investor sentiment for Synlait Milk isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Synlait Milk

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.

Synlait Milk became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

In contrast to the share price, revenue has actually increased by 15% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Synlait Milk has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Synlait Milk stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that Synlait Milk shareholders are down 16% for the year. Unfortunately, that's worse than the broader market decline of 3.1%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, longer term shareholders are suffering worse, given the loss of 11% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. To that end, you should be aware of the 1 warning sign we've spotted with Synlait Milk .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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