As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Serinus Energy plc (LON:SENX) investors who have held the stock for three years as it declined a whopping 88%. That'd be enough to cause even the strongest minds some disquiet. And over the last year the share price fell 46%, so we doubt many shareholders are delighted. 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.
On a more encouraging note the company has added US$1.9m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
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 five years of share price growth, Serinus Energy moved from a loss to profitability. 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 34% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating Serinus Energy further; while we may be missing something on this analysis, there might also be an opportunity.
You can see below how earnings and revenue have 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. You can see what analysts are predicting for Serinus Energy in this interactive graph of future profit estimates.
A Different Perspective
The last twelve months weren't great for Serinus Energy shares, which performed worse than the market, costing holders 46%. Meanwhile, the broader market slid about 20%, likely weighing on the stock. However, the loss over the last year isn't as bad as the 23% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Serinus Energy better, we need to consider many other factors. For instance, we've identified 3 warning signs for Serinus Energy that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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