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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Columbia Sportswear Company (NASDAQ:COLM) share price slid 19% over twelve months. That's disappointing when you consider the market returned 22%. Zooming out, the stock is down 15% in the last three years.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for Columbia Sportswear
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unhappily, Columbia Sportswear had to report a 15% decline in EPS over the last year. The share price decline of 19% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Columbia Sportswear's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 22% in the last year, Columbia Sportswear shareholders lost 17% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Columbia Sportswear better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Columbia Sportswear you should know about.