Some AirAsia X Berhad (KLSE:AAX) shareholders are probably rather concerned to see the share price fall 32% over the last three months. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 108% in that time. It's not uncommon to see a share price retrace a bit, after a big gain. The thing to consider is whether the underlying business is doing well enough to support the current price.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 of share price growth, AirAsia X Berhad actually saw its earnings per share (EPS) drop 81% per year.
This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.
You can only imagine how long term shareholders feel about the declining revenue trend (slipping at per year). The only thing that's clear is there is low correlation between AirAsia X Berhad's share price and its historic fundamental data. Further research may be required!
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at AirAsia X Berhad's financial health with this free report on its balance sheet .
A Different Perspective
While it's certainly disappointing to see that AirAsia X Berhad shares lost 3.1% throughout the year, that wasn't as bad as the market loss of 7.5%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 14% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with AirAsia X Berhad .