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It's not a secret that every investor will make bad investments, from time to time. But it should be a priority to avoid stomach churning catastrophes, wherever possible. It must have been painful to be a Ferroglobe PLC (NASDAQ:GSM) shareholder over the last year, since the stock price plummeted 82% in that time. A loss like this is a stark reminder that portfolio diversification is important. Notably, shareholders had a tough run over the longer term, too, with a drop of 80% in the last three years. There was little comfort for shareholders in the last week as the price declined a further 4.6%.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the last year Ferroglobe grew its earnings per share, moving from a loss to a profit. Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.
Ferroglobe's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Of course, it could simply be that it simply fell short of the market consensus expectations.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
We know that Ferroglobe has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Ferroglobe shareholders are down 82% for the year (even including dividends), but the broader market is up 10%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 40% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Keeping this in mind, a solid next step might be to take a look at Ferroglobe's dividend track record. This free interactive graph is a great place to start.
Of course Ferroglobe may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.