Yahoo Finance Gem Diamonds (LON:GEMD) shareholders have endured a 58% loss from investing in the stock three years ago
Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Gem Diamonds Limited (LON:GEMD) shareholders. Sadly for them, the share price is down 60% in that time. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Gem Diamonds
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Gem Diamonds' earnings per share (EPS) dropped by 8.6% each year. The share price decline of 26% 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 3.10.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Gem Diamonds has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
Gem Diamonds shareholders gained a total return of 3.5% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 9% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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 4 warning signs we've spotted with Gem Diamonds (including 1 which is significant) .
We will like Gem Diamonds better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
