Menu Close

Motorcar Parts of America (NASDAQ:MPAA) shareholders have endured a 50% loss from investing in the stock five years ago

view original post

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Motorcar Parts of America, Inc. (NASDAQ:MPAA) share price is a whole 50% lower. That’s not a lot of fun for true believers. And we doubt long term believers are the only worried holders, since the stock price has declined 33% over the last twelve months. Even worse, it’s down 15% in about a month, which isn’t fun at all. But this could be related to poor market conditions — stocks are down 9.1% in the same time.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Motorcar Parts of America

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

Looking back five years, both Motorcar Parts of America’s share price and EPS declined; the latter at a rate of 23% per year. This fall in the EPS is worse than the 13% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth

We know that Motorcar Parts of America has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Motorcar Parts of America’s balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market lost about 5.6% in the twelve months, Motorcar Parts of America shareholders did even worse, losing 33%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% 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. 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. For instance, we’ve identified 2 warning signs for Motorcar Parts of America that you should be aware of.

But note: Motorcar Parts of America may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.