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Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example the Daisho Microline Holdings Limited (HKG:567) share price dropped 58% over five years. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 26% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.
See our latest analysis for Daisho Microline Holdings
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Daisho Microline Holdings became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
Revenue is actually up 37% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
While the broader market lost about 5.3% in the twelve months, Daisho Microline Holdings shareholders did even worse, losing 26%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 16% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.