Yahoo Finance Investors in AMC Networks (NASDAQ:AMCX) have unfortunately lost 81% over the last five years
Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held AMC Networks Inc. (NASDAQ:AMCX) for five whole years - as the share price tanked 81%. We also note that the stock has performed poorly over the last year, with the share price down 37%. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for AMC Networks
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).
During the five years over which the share price declined, AMC Networks' earnings per share (EPS) dropped by 8.4% each year. This reduction in EPS is less than the 28% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 2.33 further reflects this reticence.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on AMC Networks' earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 28% in the last year, AMC Networks shareholders lost 37%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 13% over the last half decade. 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. 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. For example, we've discovered 3 warning signs for AMC Networks (2 make us uncomfortable!) that you should be aware of before investing here.
But note: AMC Networks may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
