American Woodmark's (NASDAQ:AMWD) earnings have declined over year, contributing to shareholders 38% loss

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by American Woodmark Corporation (NASDAQ:AMWD) shareholders over the last year, as the share price declined 38%. That falls noticeably short of the market return of around 12%. Longer term investors have fared much better, since the share price is up 20% in three years. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.

The recent uptick of 6.4% could be a positive sign of things to come, so let's take a look at historical fundamentals.

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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, American Woodmark had to report a 11% decline in EPS over the last year. The share price decline of 38% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 8.90 also points to the negative market sentiment.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how American Woodmark has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling American Woodmark stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 12% in the last year, American Woodmark shareholders lost 38%. 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. On the bright side, long term shareholders have made money, with a gain of 1.0% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on American Woodmark it might be wise to click here to see if insiders have been buying or selling shares.

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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.