Investors five-year losses continue as Phibro Animal Health (NASDAQ:PAHC) dips a further 8.3% this week, earnings continue to decline
Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example the Phibro Animal Health Corporation (NASDAQ:PAHC) share price dropped 60% over five years. That's not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 38% over the last twelve months. Furthermore, it's down 23% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since Phibro Animal Health has shed US$54m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for Phibro Animal Health
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.
Looking back five years, both Phibro Animal Health's share price and EPS declined; the latter at a rate of 5.8% per year. This reduction in EPS is less than the 17% annual reduction in the share price. This implies that the market is more cautious about the business these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Phibro Animal Health's key metrics by checking this interactive graph of Phibro Animal Health's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Phibro Animal Health's TSR for the last 5 years was -56%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 18% in the twelve months, Phibro Animal Health shareholders did even worse, losing 37% (even including dividends). 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 9% 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 2 warning signs with Phibro Animal Health (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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