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While it may not be enough for some shareholders, we think it is good to see the AAR Corp. (NYSE:AIR) share price up 10% in a single quarter. But that doesn't change the fact that the returns over the last year have been disappointing. Specifically, the stock price slipped by 51% in that time. It's not that amazing to see a bounce after a drop like that. It may be that the fall was an overreaction.
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 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.
AAR fell to a loss making position during the year. Some investors no doubt dumped the stock as a result. Of course, if the company can turn the situation around, investors will likely profit.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on AAR's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
AAR shareholders are down 51% for the year (even including dividends), but the market itself is up 20%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.8% over the last half decade. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with AAR , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
This article by Simply Wall St is general in nature. 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.
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