If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Calavo Growers, Inc. (NASDAQ:CVGW) shareholders know that all too well, since the share price is down considerably over three years. So they might be feeling emotional about the 59% share price collapse, in that time. And over the last year the share price fell 41%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 38% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
While the stock has risen 8.2% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Calavo Growers became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.
We think that the revenue decline over three years, at a rate of 3.0% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Calavo Growers stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Calavo Growers shareholders are down 40% for the year (even including dividends), but the market itself is up 39%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% 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 Calavo Growers better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Calavo Growers you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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