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The past three years for Regional Express Holdings (ASX:REX) investors has not been profitable

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Regional Express Holdings Limited (ASX:REX) have had an unfortunate run in the last three years. Sadly for them, the share price is down 50% in that time. And over the last year the share price fell 42%, so we doubt many shareholders are delighted.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Regional Express Holdings

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 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.

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Regional Express Holdings became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.

We note that, in three years, revenue has actually grown at a 55% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Regional Express Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

If you are thinking of buying or selling Regional Express Holdings stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Regional Express Holdings had a tough year, with a total loss of 42%, against a market gain of about 14%. 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 7% 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 instance, we've identified 4 warning signs for Regional Express Holdings (2 are potentially serious) that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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