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Did Changing Sentiment Drive PC Jeweller's (NSE:PCJEWELLER) Share Price Down A Painful 87%?

Simply Wall St

As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of PC Jeweller Limited (NSE:PCJEWELLER) investors who have held the stock for three years as it declined a whopping 87%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. The more recent news is of little comfort, with the share price down 71% in a year. The falls have accelerated recently, with the share price down 74% 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.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for PC Jeweller

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

PC Jeweller saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NSEI:PCJEWELLER Past and Future Earnings, August 23rd 2019

It might be well worthwhile taking a look at our free report on PC Jeweller's earnings, revenue and cash flow.

A Different Perspective

We regret to report that PC Jeweller shareholders are down 70% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. 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 21% per year over five years. 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 PC Jeweller it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN 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.