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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding Cash Converters International Limited (ASX:CCV) during the five years that saw its share price drop a whopping 87%. We also note that the stock has performed poorly over the last year, with the share price down 63%. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days.

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.

See our latest analysis for Cash Converters International

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Looking back five years, both Cash Converters International's share price and EPS declined; the latter at a rate of 24% per year. This reduction in EPS is less than the 33% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.85 further reflects this reticence.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Cash Converters International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Cash Converters International shareholders are down 62% for the year, but the market itself is up 6.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 32% over the last half decade. 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.