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American Vanguard Corporation (NYSE:AVD) shareholders should be happy to see the share price up 20% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 21% in the last three years, significantly under-performing the market.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years that the share price fell, American Vanguard's earnings per share (EPS) dropped by 12% each year. This fall in the EPS is worse than the 7% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While the broader market gained around 23% in the last year, American Vanguard shareholders lost 19% (even including dividends). 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 2%, 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. It's always interesting to track share price performance over the longer term. But to understand American Vanguard better, we need to consider many other factors. For instance, we've identified 4 warning signs for American Vanguard that you should be aware of.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. 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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