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Every investor on earth makes bad calls sometimes. But really bad investments should be rare. So consider, for a moment, the misfortune of North Eastern Carrying Corporation Limited (NSE:NECCLTD) investors who have held the stock for three years as it declined a whopping 78%. That would certainly shake our confidence in the decision to own the stock. And the ride hasn't got any smoother in recent times over the last year, with the price 48% lower in that time. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. 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.
See our latest analysis for North Eastern Carrying
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).
During the three years that the share price fell, North Eastern Carrying's earnings per share (EPS) dropped by 7.0% each year. The share price decline of 39% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 9.09.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into North Eastern Carrying's key metrics by checking this interactive graph of North Eastern Carrying's earnings, revenue and cash flow.
A Different Perspective
Over the last year, North Eastern Carrying shareholders took a loss of 48%. In contrast the market gained about 5.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 39% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before forming an opinion on North Eastern Carrying you might want to consider these 3 valuation metrics.