Canada markets closed
  • S&P/TSX

    20,758.34
    +17.90 (+0.09%)
     
  • S&P 500

    4,136.48
    -43.28 (-1.04%)
     
  • DOW

    33,926.01
    -127.93 (-0.38%)
     
  • CAD/USD

    0.7467
    -0.0043 (-0.58%)
     
  • CRUDE OIL

    73.23
    -2.65 (-3.49%)
     
  • BTC-CAD

    31,017.92
    -557.38 (-1.77%)
     
  • CMC Crypto 200

    535.42
    -1.43 (-0.27%)
     
  • GOLD FUTURES

    1,865.90
    -50.40 (-2.63%)
     
  • RUSSELL 2000

    1,985.53
    -15.69 (-0.78%)
     
  • 10-Yr Bond

    3.5320
    +0.1360 (+4.00%)
     
  • NASDAQ

    12,006.96
    -193.86 (-1.59%)
     
  • VOLATILITY

    18.33
    -0.40 (-2.14%)
     
  • FTSE

    7,901.80
    +81.64 (+1.04%)
     
  • NIKKEI 225

    27,509.46
    +107.41 (+0.39%)
     
  • CAD/EUR

    0.6908
    +0.0026 (+0.38%)
     

Koss (NASDAQ:KOSS) shareholders are still up 299% over 5 years despite pulling back 17% in the past week

Koss Corporation (NASDAQ:KOSS) shareholders have seen the share price descend 25% over the month. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 299% higher today. We think it's more important to dwell on the long term returns than the short term returns. The more important question is whether the stock is too cheap or too expensive today. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 65% drop, in the last year.

In light of the stock dropping 17% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for Koss

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 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 five years of share price growth, Koss moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Koss share price has gained 192% in three years. In the same period, EPS is up 50% per year. This EPS growth is reasonably close to the 43% average annual increase in the share price (over three years, again). So you could reasonably conclude that investor sentiment towards the stock has remained pretty steady, over time. There's a strong correlation between the share price and EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Koss' 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 lost about 22% in the twelve months, Koss shareholders did even worse, losing 65%. 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. Longer term investors wouldn't be so upset, since they would have made 32%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example - Koss has 3 warning signs (and 1 which is concerning) we think you should know about.

Koss is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here