Investors one-year losses continue as Midsona (STO:MSON B) dips a further 12% this week, earnings continue to decline

Even the best stock pickers will make plenty of bad investments. Anyone who held Midsona AB (publ) (STO:MSON B) over the last year knows what a loser feels like. The share price has slid 64% in that time. To make matters worse, the returns over three years have also been really disappointing (the share price is 39% lower than three years ago). Furthermore, it's down 33% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 20% decline in the broader market, throughout the period.

With the stock having lost 12% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for Midsona

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Midsona had to report a 52% decline in EPS over the last year. We note that the 64% share price drop is very close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

We regret to report that Midsona shareholders are down 63% for the year. Unfortunately, that's worse than the broader market decline of 1.6%. 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, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Midsona (of which 1 makes us a bit uncomfortable!) you should know about.

Midsona is not the only stock that insiders are buying. 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 SE 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.