Even the best investor on earth makes unsuccessful investments. But serious investors should think long and hard about avoiding extreme losses. We wouldn’t blame Locaweb Serviços de Internet S.A. (BVMF:LWSA3) shareholders if they were still in shock after the stock dropped like a lead balloon, down 75% in just one year. A loss like this is a stark reminder that portfolio diversification is important. Locaweb Serviços de Internet may have better days ahead, of course; we’ve only looked at a one year period. Unfortunately the share price momentum is still quite negative, with prices down 29% in thirty days.
After losing 9.2% this past week, it’s worth investigating the company’s fundamentals to see what we can infer from past performance.
View our latest analysis for Locaweb Serviços de Internet
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
Locaweb Serviços de Internet fell to a loss making position during the year. Buyers no doubt think it’s a temporary situation, but those with a nose for quality have low tolerance for losses. Of course, if the company can turn the situation around, investors will likely profit.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
We doubt Locaweb Serviços de Internet shareholders are happy with the loss of 75% over twelve months (even including dividends). That falls short of the market, which lost 10%. There’s no doubt that’s a disappointment, but the stock may well have fared better in a stronger market. With the stock down 22% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. 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. Even so, be aware that Locaweb Serviços de Internet is showing 1 warning sign in our investment analysis , you should know about…
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 BR 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.