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Investors Who Bought Clearwater Paper (NYSE:CLW) Shares Three Years Ago Are Now Down 70%

Simply Wall St

Clearwater Paper Corporation (NYSE:CLW) shareholders should be happy to see the share price up 19% in the last month. But that is meagre solace in the face of the shocking decline over three years. To wit, the share price sky-dived 70% in that time. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.

View our latest analysis for Clearwater Paper

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over the three years that the share price declined, Clearwater Paper's earnings per share (EPS) dropped significantly, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!

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

NYSE:CLW Past and Future Earnings, September 25th 2019

Dive deeper into Clearwater Paper's key metrics by checking this interactive graph of Clearwater Paper's earnings, revenue and cash flow.


A Different Perspective

While the broader market gained around 2.2% in the last year, Clearwater Paper shareholders lost 36%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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 Clearwater Paper it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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 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.