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The last three months have been tough on EuroDry Ltd. (NASDAQ:EDRY) shareholders, who have seen the share price decline a rather worrying 58%. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 101% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. If the business can perform well for years to come, then the recent drop could be an opportunity.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for EuroDry
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 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.
EuroDry became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how EuroDry has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling EuroDry stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for EuroDry shares, which performed worse than the market, costing holders 28%. Meanwhile, the broader market slid about 16%, likely weighing on the stock. Investors are up over three years, booking 26% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, 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 EuroDry better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with EuroDry (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.