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As every investor would know, not every swing hits the sweet spot. But you have a problem if you face massive losses more than once in a while. So take a moment to sympathize with the long term shareholders of Fox Factory Holding Corp. (NASDAQ:FOXF), who have seen the share price tank a massive 74% over a three year period. That would be a disturbing experience. And the ride hasn't got any smoother in recent times over the last year, with the price 65% lower in that time. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
After losing 6.9% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for Fox Factory Holding
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the three years that the share price fell, Fox Factory Holding's earnings per share (EPS) dropped by 35% each year. The 37% average annual share price decline is remarkably close to the EPS decline. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Fox Factory Holding's earnings, revenue and cash flow.
A Different Perspective
Fox Factory Holding shareholders are down 65% for the year, but the market itself is up 24%. 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 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Fox Factory Holding is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...