Largo (TSE:LGO) investors are sitting on a loss of 55% if they invested a year ago
Taking the occasional loss comes part and parcel with investing on the stock market. Unfortunately, shareholders of Largo Inc. (TSE:LGO) have suffered share price declines over the last year. The share price has slid 55% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 50% in that time. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days. But this could be related to the weak market, which is down 7.9% in the same period.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Largo
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the unfortunate twelve months during which the Largo share price fell, it actually saw its earnings per share (EPS) improve by 126%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.
Largo managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Largo shareholders are down 55% for the year, but the market itself is up 1.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Largo by clicking this link.
Largo is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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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