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As an investor, mistakes are inevitable. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Green Dot Corporation (NYSE:GDOT), who have seen the share price tank a massive 70% over a three year period. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. Furthermore, it's down 15% in about a quarter. That's not much fun for holders.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Green Dot
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).
Over the three years that the share price declined, Green Dot'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. But it's safe to say we'd generally expect the share price to be lower as a result!
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Green Dot provided a TSR of 6.4% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. It could well be that the business is stabilizing. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Green Dot , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).