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Investing in stocks comes with the risk that the share price will fall. And there's no doubt that Cimmco Limited (NSE:CIMMCO) stock has had a really bad year. In that relatively short period, the share price has plunged 60%. To make matters worse, the returns over three years have also been really disappointing (the share price is 58% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 19% 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.

View our latest analysis for Cimmco

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 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 the last year Cimmco grew its earnings per share, moving from a loss to a profit. The result looks like a strong improvement to us, so we're surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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

A Different Perspective

Investors in Cimmco had a tough year, with a total loss of 60%, against a market gain of about 1.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.7% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.

But note: Cimmco may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN 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.