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Such Is Life: How Cavalier (NZSE:CAV) Shareholders Saw Their Shares Drop 60%

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Cavalier Corporation Limited (NZSE:CAV) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 60% decline in the share price in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 52% lower in that time. On top of that, the share price is down 12% in the last week.

See our latest analysis for Cavalier

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 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.

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Over the three years that the share price declined, Cavalier's earnings per share (EPS) dropped significantly, 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 company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NZSE:CAV Past and Future Earnings, November 27th 2019
NZSE:CAV Past and Future Earnings, November 27th 2019

It might be well worthwhile taking a look at our free report on Cavalier's earnings, revenue and cash flow.

A Different Perspective

While the broader market gained around 24% in the last year, Cavalier shareholders lost 52%. 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 8.0% 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.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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.

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. Thank you for reading.