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Did Changing Sentiment Drive Fortuna Silver Mines's (TSE:FVI) Share Price Down A Worrying 51%?

Simply Wall St

Fortuna Silver Mines Inc. (TSE:FVI) shareholders will doubtless be very grateful to see the share price up 48% in the last quarter. But over the last three years we've seen a quite serious decline. Tragically, the share price declined 51% in that time. So the improvement may be a real relief to some. After all, could be that the fall was overdone.

Check out our latest analysis for Fortuna Silver Mines

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Fortuna Silver Mines moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

Revenue is actually up 11% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Fortuna Silver Mines further; while we may be missing something on this analysis, there might also be an opportunity.

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

TSX:FVI Income Statement, August 23rd 2019

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Fortuna Silver Mines

A Different Perspective

While the broader market lost about 1.7% in the twelve months, Fortuna Silver Mines shareholders did even worse, losing 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.2% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Fortuna Silver Mines is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 editorial-team@simplywallst.com. 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.