Shareholders in Goodyear Tire & Rubber (NASDAQ:GT) have lost 51%, as stock drops 10% this past week

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of The Goodyear Tire & Rubber Company (NASDAQ:GT) have had an unfortunate run in the last three years. Unfortunately, they have held through a 51% decline in the share price in that time. The more recent news is of little comfort, with the share price down 36% in a year. Furthermore, it's down 32% in about a quarter. That's not much fun for holders.

Since Goodyear Tire & Rubber has shed US$256m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Goodyear Tire & Rubber

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Goodyear Tire & Rubber has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

We note that, in three years, revenue has actually grown at a 7.1% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Goodyear Tire & Rubber further; while we may be missing something on this analysis, there might also be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Goodyear Tire & Rubber shareholders are down 36% for the year, but the market itself is up 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild 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 business. 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. Case in point: We've spotted 1 warning sign for Goodyear Tire & Rubber you should be aware of.

Goodyear Tire & Rubber is not the only stock that insiders are buying. For those who like to find lesser know companies 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 American 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.