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Did Changing Sentiment Drive Kraton's (NYSE:KRA) Share Price Down A Worrying 69%?

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Kraton Corporation (NYSE:KRA) shareholders will doubtless be very grateful to see the share price up 57% in the last month. But that isn't much consolation to those who have suffered through the declines of the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 69% in that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, it could be that the fall was overdone.

See our latest analysis for Kraton

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Unfortunately Kraton reported an EPS drop of 23% for the last year. This reduction in EPS is not as bad as the 69% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 6.68 also points to the negative market sentiment.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NYSE:KRA Past and Future Earnings April 13th 2020
NYSE:KRA Past and Future Earnings April 13th 2020

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market lost about 4.0% in the twelve months, Kraton shareholders did even worse, losing 69%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% 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. It's always interesting to track share price performance over the longer term. But to understand Kraton better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Kraton (of which 1 can't be ignored!) you should know about.

We will like Kraton better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.

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.

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. Thank you for reading.