Investors three-year losses grow to 41% as the stock sheds US$166m this past week

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As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that’s been the case for longer term Avanos Medical, Inc. (NYSE:AVNS) shareholders, since the share price is down 41% in the last three years, falling well short of the market return of around 46%. And more recent buyers are having a tough time too, with a drop of 35% in the last year. Even worse, it’s down 23% in about a month, which isn’t fun at all. However, we note the price may have been impacted by the broader market, which is down 13% in the same time period.

With the stock having lost 12% in the past week, it’s worth taking a look at business performance and seeing if there’s any red flags.

View our latest analysis for Avanos Medical

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Avanos Medical became profitable within the last five years. We would usually expect to see the share price rise as a result. So given the share price is down it’s worth checking some other metrics too.

We note that, in three years, revenue has actually grown at a 4.1% annual rate, so that doesn’t seem to be a reason to sell shares. It’s probably worth investigating Avanos Medical further; while we may be missing something on this analysis, there might also be an opportunity.

The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Avanos Medical will earn in the future (free profit forecasts).

A Different Perspective

We regret to report that Avanos Medical shareholders are down 35% for the year. Unfortunately, that’s worse than the broader market decline of 10%. 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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we’ve spotted with Avanos Medical .

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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