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The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of SDI Group plc (LON:SDI) have had an unfortunate run in the last three years. So they might be feeling emotional about the 66% share price collapse, in that time. The more recent news is of little comfort, with the share price down 44% in a year.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for SDI Group
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, SDI Group's earnings per share (EPS) dropped by 5.5% each year. This reduction in EPS is slower than the 30% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into SDI Group's key metrics by checking this interactive graph of SDI Group's earnings, revenue and cash flow.
A Different Perspective
SDI Group shareholders are down 44% for the year, but the market itself is up 15%. 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. On the bright side, long term shareholders have made money, with a gain of 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand SDI Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for SDI Group you should be aware of.
Of course SDI Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.