This week we saw the Astronics Corporation (NASDAQ:ATRO) share price climb by 11%. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 82% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The million dollar question is whether the company can justify a long term recovery.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the five years over which the share price declined, Astronics's earnings per share (EPS) dropped by 0.9% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 29% per year, over the period. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 5.62.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Astronics has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Astronics will grow revenue in the future.
A Different Perspective
We regret to report that Astronics shareholders are down 72% for the year. Unfortunately, that's worse than the broader market decline of 8.9%. 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 29% 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. 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 4 warning signs with Astronics (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
We will like Astronics 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.
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