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While it may not be enough for some shareholders, we think it is good to see the Coffee Holding Co., Inc. (NASDAQ:JVA) share price up 10% in a single quarter. But over the last half decade, the stock has not performed well. After all, the share price is down 16% in that time, significantly under-performing the market.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Looking back five years, both Coffee Holding's share price and EPS declined; the latter at a rate of 38% per year. This fall in the EPS is worse than the 3.4% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 82.19, it's fair to say the market sees a brighter future for the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Coffee Holding's earnings, revenue and cash flow.
A Different Perspective
Coffee Holding shareholders are down 2.7% for the year, but the market itself is up 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 3.4% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Is Coffee Holding cheap compared to other companies? These 3 valuation measures might help you decide.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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