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As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Farm Pride Foods Limited (ASX:FRM), who have seen the share price tank a massive 89% over a three year period. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 77% in a year. Furthermore, it's down 73% 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.
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See our latest analysis for Farm Pride Foods
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Over the three years that the share price declined, Farm Pride Foods's earnings per share (EPS) dropped significantly, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Farm Pride Foods's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in Farm Pride Foods had a tough year, with a total loss of 77%, against a market gain of about 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. You could get a better understanding of Farm Pride Foods's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course Farm Pride Foods may not be the best stock to buy. So you may wish to see this free collection of growth stocks.