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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Constellium SE (NYSE:CSTM) stock is up an impressive 124% over the last five years. In the last week shares have slid back 6.6%.
Since the long term performance has been good but there's been a recent pullback of 6.6%, let's check if the fundamentals match the share price.
View our latest analysis for Constellium
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years of share price growth, Constellium moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Constellium share price is up 116% in the last three years. In the same period, EPS is up 15% per year. Notably, the EPS growth has been slower than the annualised share price gain of 29% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Constellium has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It's good to see that Constellium has rewarded shareholders with a total shareholder return of 40% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 17% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Constellium (of which 2 are significant!) you should know about.