The past three years for Avantor (NYSE:AVTR) investors has not been profitable

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Avantor, Inc. (NYSE:AVTR) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 51% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 36% in the last year. Furthermore, it's down 23% in about a quarter. That's not much fun for holders.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

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.

Although the share price is down over three years, Avantor actually managed to grow EPS by 6.7% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Arguably the revenue decline of 4.3% per year has people thinking Avantor is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

Avantor is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Avantor stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

Investors in Avantor had a tough year, with a total loss of 36%, against a market gain of about 7.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 4% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Avantor has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

We will like Avantor better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.