If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Lee Enterprises, Incorporated (NYSE:LEE) have had an unfortunate run in the last three years. So they might be feeling emotional about the 58% share price collapse, in that time. And over the last year the share price fell 47%, so we doubt many shareholders are delighted. Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the three years that the share price fell, Lee Enterprises’s earnings per share (EPS) dropped by 27% each year. This change in EPS is reasonably close to the 25% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Lee Enterprises’s key metrics by checking this interactive graph of Lee Enterprises’s earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 26% in the last year, Lee Enterprises shareholders lost 47%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 16% over the last half decade. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 5 warning signs for Lee Enterprises (1 is a bit concerning) that you should be aware of.