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Every investor on earth makes bad calls sometimes. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of DLH Holdings Corp. (NASDAQ:DLHC); the share price is down a whopping 78% in the last three years. That would be a disturbing experience. The more recent news is of little comfort, with the share price down 68% in a year. Shareholders have had an even rougher run lately, with the share price down 48% in the last 90 days.
With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years that the share price fell, DLH Holdings' earnings per share (EPS) dropped by 30% each year. The share price decline of 40% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 9.50.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on DLH Holdings' earnings, revenue and cash flow.
A Different Perspective
Investors in DLH Holdings had a tough year, with a total loss of 68%, against a market gain of about 7.3%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.1% per year over five years. 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. 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. To that end, you should learn about the 3 warning signs we've spotted with DLH Holdings (including 2 which shouldn't be ignored) .