Locaweb Serviços de Internet (BVMF:LWSA3) shareholders are down 68% YoY, with lower profits likely to blame
The nature of investing is that you gain some and you lose some. And there’s no doubt that Locaweb Internet Services SA (BVMF:LWSA3) The stock had a very bad year. Namely, the stock price fell by 68% during this period. Locaweb Serviços de Internet may have better days ahead, of course; we only looked at a one-year period. Moreover, it fell by 60% in about a quarter. It’s not much fun for the holders.
Given that the past week has been tough for shareholders, let’s take a look at the fundamentals and see what we can learn.
See our latest analysis for Locaweb Serviços de Internet
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but simple way to examine the evolution of a company’s perception by the market is to compare the evolution of earnings per share (EPS) with the evolution of the share price.
Unfortunately, Locaweb Serviços de Internet reported a 98% drop in EPS for the last year. This was partly due to extraordinary items impacting earnings. The 68% drop in share price is not as bad as the reduction in earnings per share. So the market may not be too concerned about the EPS figure at the moment – or it may have expected earnings to fall faster. Indeed, with a P/E ratio of 12.32k, there is obviously real optimism about an earnings rebound.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
It might be interesting to take a look at our free report on the results, turnover and cash flow of Locaweb Serviços de Internet.
A different perspective
We doubt that the shareholders of Locaweb Serviços de Internet will be satisfied with the loss of 68% over twelve months (even dividends included). This is below the market, which lost 15%. It’s disappointing, but it’s worth bearing in mind that selling market-wide wouldn’t have helped. The decline in the share price has continued over the past three months, down 60%, suggesting a lack of enthusiasm from investors. Basically, most investors should be wary of buying poorly performing stocks unless the company itself has clearly improved. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Example: we have identified 4 warning signs for Locaweb Serviços de Internet you should be aware.
But note: Locaweb Serviços de Internet may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).
Please note that the market returns quoted in this article reflect the market-weighted average returns of the stocks currently trading on the BR exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.