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The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But serious investors should think long and hard about avoiding extreme losses. So spare a thought for the long term shareholders of Borosil Glass Works Limited (NSE:BOROSIL); the share price is down a whopping 81% in the last twelve months. That'd be a striking reminder about the importance of diversification. We wouldn't rush to judgement on Borosil Glass Works because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 17% in the last three months.
We would be remiss not to highlight the spin-off of Hopewell Tableware, now known as Gujarat Borosil Limited. We don't track the returns of spin-off stocks in our returns for Borosil Glass Works, but Gujarat Borosil shares are down approximately 18% since July 2018.
Check out our latest analysis for Borosil Glass Works
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).
Unhappily, Borosil Glass Works had to report a 65% decline in EPS over the last year. The share price decline of 81% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Borosil Glass Works has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While Borosil Glass Works shareholders are down 81% for the year (even including dividends), the market itself is up 0.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 17%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before forming an opinion on Borosil Glass Works you might want to consider these 3 valuation metrics.