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Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of PG Electroplast Limited (NSE:PGEL) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 69%. Notably, shareholders had a tough run over the longer term, too, with a drop of 41% in the last three years. The falls have accelerated recently, with the share price down 14% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
View our latest analysis for PG Electroplast
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 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).
Even though the PG Electroplast share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
PG Electroplast managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
This free interactive report on PG Electroplast's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
PG Electroplast shareholders are down 69% for the year, but the market itself is up 5.8%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 16% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Is PG Electroplast cheap compared to other companies? These 3 valuation measures might help you decide.