Did You Manage To Avoid Prophecy International Holdings's (ASX:PRO) Devastating 77% Share Price Drop?
As an investor, mistakes are inevitable. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Prophecy International Holdings Limited (ASX:PRO); the share price is down a whopping 77% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 49% in the last year. Furthermore, it's down 10% in about a quarter. That's not much fun for holders.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
View our latest analysis for Prophecy International Holdings
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Prophecy International Holdings saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Prophecy International Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Prophecy International Holdings's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Prophecy International Holdings's TSR of was a loss of 77% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market gained around 12% in the last year, Prophecy International Holdings shareholders lost 49%. 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 9.4% per year over five years. We realise that Buffett 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 businesses. If you would like to research Prophecy International Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 AU exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
