You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself.Stocks: Real-time U.S. Simply Wall St has no position in any stocks mentioned. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. We aim to bring you long-term focused analysis driven by fundamental data. 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 provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. This article by Simply Wall St is general in nature. Alternatively, email editorial-team (at). Have feedback on this article? Concerned about the content? Get in touch with us directly. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African exchanges. So take a peek at this free list of companies we expect will grow earnings. Of course, you might find a fantastic investment by looking elsewhere. We've identified 2 warning signs with KAP (at least 1 which can't be ignored), and understanding them should be part of your investment process. Consider for instance, the ever-present spectre of investment risk. But to truly gain insight, we need to consider other information, too. I find it very interesting to look at share price over the long term as a proxy for business performance. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. 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. While the broader market gained around 7.5% in the last year, KAP shareholders lost 34% (even including dividends). 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 not immediately clear to us why the stock price is down but further research might provide some answers. The steady dividend doesn't really explain why the share price is down. Looking to other metrics might better explain the share price change. Alternatively, growth expectations may have been unreasonable in the past.īy glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.ĭuring the unfortunate half decade during which the share price slipped, KAP actually saw its earnings per share (EPS) improve by 2.5% per year. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress. The falls have accelerated recently, with the share price down 16% in the last three months. And some of the more recent buyers are probably worried, too, with the stock falling 39% in the last year. ![]() We certainly feel for shareholders who bought near the top. For example the KAP Limited ( JSE:KAP) share price dropped 65% over five years. But that doesn't mean long term investors can avoid big losses. ![]() Statistically speaking, long term investing is a profitable endeavour.
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