The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. It must have been painful to be a The ODP Corporation (NASDAQ:ODP) shareholder over the last year, since the stock price plummeted 76% in that time. That'd be enough to make even the strongest stomachs churn. We note that it has not been easy for shareholders over three years, either; the share price is down 73% in that time. Furthermore, it's down 46% in about a quarter. That's not much fun for holders.
With the stock having lost 14% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
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. 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.
Unfortunately ODP reported an EPS drop of 51% for the last year. This reduction in EPS is not as bad as the 76% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 3.40 also points to the negative market sentiment.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on ODP's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that ODP shareholders are down 76% for the year. Unfortunately, that's worse than the broader market decline of 4.5%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild 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 business. It's always interesting to track share price performance over the longer term. But to understand ODP better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for ODP (of which 1 doesn't sit too well with us!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. 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. 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 aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.