It's not a secret that every investor will make bad investments, from time to time. But it would be foolish to simply accept every extremely large loss as an inevitable part of the game. We wouldn't blame Lasa Supergenerics Limited (NSE:LASA) shareholders if they were still in shock after the stock dropped like a lead balloon, down 74% in just one year. That'd be enough to make even the strongest stomachs churn. Lasa Supergenerics may have better days ahead, of course; we've only looked at a one year period. Shareholders have had an even rougher run lately, with the share price down 17% in the last 90 days.
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. 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.
Lasa Supergenerics fell to a loss making position during the year. Some investors no doubt dumped the stock as a result. We hope for shareholders' sake that the company becomes profitable again soon.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. It might be well worthwhile taking a look at our free report on Lasa Supergenerics's earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 0.6% in the last year, Lasa Supergenerics shareholders might be miffed that they lost 74%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 17%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do 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 IN exchanges.
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