eGain (NASDAQ:EGAN) stock falls 25% in past week as three-year earnings and shareholder returns continue downward trend

Investing in stocks inevitably means buying into some companies that perform poorly. Long term eGain Corporation (NASDAQ:EGAN) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 54% in that time. The more recent news is of little comfort, with the share price down 34% in a year. The last week also saw the share price slip down another 25%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 25% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for eGain

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During five years of share price growth, eGain moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.

Revenue is actually up 9.4% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating eGain further; while we may be missing something on this analysis, there might also be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that eGain has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for eGain in this interactive graph of future profit estimates.

A Different Perspective

Investors in eGain had a tough year, with a total loss of 34%, against a market gain of about 23%. 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 8% 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. 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. Even so, be aware that eGain is showing 1 warning sign in our investment analysis , you should know about...

Of course eGain may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.