Calavo Growers (NASDAQ:CVGW) sheds US$129m, company earnings and investor returns have been trending downwards for past three years

By
Simply Wall St
Published
September 09, 2021
NasdaqGS:CVGW
Source: Shutterstock

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Calavo Growers, Inc. (NASDAQ:CVGW) shareholders. Regrettably, they have had to cope with a 61% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 40% in the last year. Furthermore, it's down 43% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since Calavo Growers has shed US$129m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Calavo Growers

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, Calavo Growers moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

Arguably the revenue decline of 3.0% per year has people thinking Calavo Growers is shrinking. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

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

earnings-and-revenue-growth
NasdaqGS:CVGW Earnings and Revenue Growth September 10th 2021

We know that Calavo Growers has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Calavo Growers shareholders are down 40% for the year (even including dividends), but the market itself is up 38%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Calavo Growers better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Calavo Growers you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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