Investors in Knights Group Holdings (LON:KGH) have unfortunately lost 81% over the last three years

·3 min read

As an investor, mistakes are inevitable. But really bad investments should be rare. So consider, for a moment, the misfortune of Knights Group Holdings plc (LON:KGH) investors who have held the stock for three years as it declined a whopping 82%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 59%, so we doubt many shareholders are delighted. Furthermore, it's down 39% in about a quarter. That's not much fun for holders. While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.

View our latest analysis for Knights Group Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Knights Group Holdings' earnings per share (EPS) dropped by 29% each year. The share price decline of 43% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Knights Group Holdings' earnings, revenue and cash flow.

A Different Perspective

The last twelve months weren't great for Knights Group Holdings shares, which performed worse than the market, costing holders 57%, including dividends. Meanwhile, the broader market slid about 2.9%, likely weighing on the stock. The three-year loss of 22% 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. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Take risks, for example - Knights Group Holdings has 6 warning signs we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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