MGP Ingredients (NASDAQ:MGPI) investors are sitting on a loss of 68% if they invested three years ago

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term MGP Ingredients, Inc. (NASDAQ:MGPI) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 69% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 61% in the last year. More recently, the share price has dropped a further 10% in a month.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
MGP Ingredients saw its EPS decline at a compound rate of 54% per year, over the last three years. This fall in the EPS is worse than the 32% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 57.06.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on MGP Ingredients' earnings, revenue and cash flow.
MGP Ingredients shareholders are down 60% for the year (even including dividends), but the market itself is up 12%. 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 3% 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. 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. Case in point: We've spotted 4 warning signs for MGP Ingredients you should be aware of.
MGP Ingredients is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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