Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Citi Trends, Inc. (NASDAQ:CTRN) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 51%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 11% in three years. The falls have accelerated recently, with the share price down 32% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
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 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).
Even though the Citi Trends share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Revenue was fairly steady year on year, which isn't usually such a bad thing. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Take a more thorough look at Citi Trends's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Citi Trends's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Citi Trends's TSR of was a loss of 50% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Citi Trends shareholders are down 50% for the year (even including dividends), but the market itself is up 2.7%. 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 6.3% over the last half decade. We realise that Buffett 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 businesses. Before spending more time on Citi Trends it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.