Perion Network (NASDAQ:PERI) stock falls 14% in past week as three-year earnings and shareholder returns continue downward trend

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of Perion Network Ltd. (NASDAQ:PERI) investors who have held the stock for three years as it declined a whopping 71%. That would certainly shake our confidence in the decision to own the stock. The more recent news is of little comfort, with the share price down 46% in a year. The falls have accelerated recently, with the share price down 19% in the last three months. Of course, this share price action may well have been influenced by the 17% decline in the broader market, throughout the period.

Since Perion Network has shed US$52m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

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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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Perion Network saw its EPS decline at a compound rate of 37% per year, over the last three years. This change in EPS is reasonably close to the 34% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here .

A Different Perspective

While the broader market lost about 4.5% in the twelve months, Perion Network shareholders did even worse, losing 46%. 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. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Perion Network better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Perion Network (of which 1 is a bit unpleasant!) you should know about.

But note: Perion Network may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.