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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of AIC Mines Limited (ASX:A1M) have had an unfortunate run in the last three years. Unfortunately, they have held through a 55% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 24% in the last year. Even worse, it's down 24% in about a month, which isn't fun at all.
After losing 18% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
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.
Although the share price is down over three years, AIC Mines actually managed to grow EPS by 13% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We note that, in three years, revenue has actually grown at a 27% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating AIC Mines further; while we may be missing something on this analysis, there might also be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling AIC Mines stock, you should check out this free report showing analyst profit forecasts .
A Different Perspective
While the broader market lost about 4.0% in the twelve months, AIC Mines shareholders did even worse, losing 24%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 0.8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand AIC Mines better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with AIC Mines (including 1 which is potentially serious) .