Yahoo Finance Keywords Studios (LON:KWS) sheds UK£108m, company earnings and investor returns have been trending downwards for past three years
If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Keywords Studios plc (LON:KWS) shareholders. Regrettably, they have had to cope with a 58% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 55% in the last year. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
See our latest analysis for Keywords Studios
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years that the share price fell, Keywords Studios' earnings per share (EPS) dropped by 6.0% each year. The share price decline of 25% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. Of course, with a P/E ratio of 53.69, the market remains optimistic.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Keywords Studios' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market gained around 4.7% in the last year, Keywords Studios shareholders lost 55% (even including dividends). 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 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Keywords Studios better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Keywords Studios , and understanding them should be part of your investment process.
Keywords Studios is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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.
