Even the best stock pickers will make plenty of bad investments. And unfortunately for Columbus McKinnon Corporation (NASDAQ:CMCO) shareholders, the stock is a lot lower today than it was a year ago. The share price is down a hefty 51% in that time. At least the damage isn't so bad if you look at the last three years, since the stock is down 29% in that time. More recently, the share price has dropped a further 19% in a month. We do note, however, that the broader market is down 9.0% in that period, and this may have weighed on the share price.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
The last year saw Columbus McKinnon's EPS really take off. We don't think the growth guide to the sustainable growth rate in this case, but we do think this sort of increase is impressive. As you can imagine, the share price action therefore perturbs us. Some different data might shed some more light on the situation.
With a low yield of 1.1% we doubt that the dividend influences the share price much. Columbus McKinnon managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Columbus McKinnon has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Columbus McKinnon
A Different Perspective
We regret to report that Columbus McKinnon shareholders are down 51% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 21%. 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 6% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Columbus McKinnon , and understanding them should be part of your investment process.
We will like Columbus McKinnon 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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