Even the best investor on earth makes unsuccessful investments. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Kongsberg Automotive ASA (OB:KOA) shareholders if they were still in shock after the stock dropped like a lead balloon, down 88% in just one year. That'd be a striking reminder about the importance of diversification. To make matters worse, the returns over three years have also been really disappointing (the share price is 86% lower than three years ago). Furthermore, it's down 84% 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.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Unfortunately Kongsberg Automotive reported an EPS drop of 91% for the last year. Remarkably, he share price decline of 88% per year is particularly close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. 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 Kongsberg Automotive's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 18% in the twelve months, Kongsberg Automotive shareholders did even worse, losing 88%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 32% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Kongsberg Automotive better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Kongsberg Automotive (including 1 which is doesn't sit too well with us) .
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NO exchanges.
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.
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