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We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Evolving Systems, Inc. (NASDAQ:EVOL) for five whole years - as the share price tanked 91%. And it's not just long term holders hurting, because the stock is down 70% in the last year. Furthermore, it's down 30% in about a quarter. That's not much fun for holders.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Over five years Evolving Systems's earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Evolving Systems's earnings, revenue and cash flow.
A Different Perspective
Evolving Systems shareholders are down 70% for the year, but the market itself is up 7.0%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 37% 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. If you would like to research Evolving Systems in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will 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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.