Investing in 8VI Holdings (ASX:8VI) three years ago would have delivered you a 304% gain

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8VI Holdings Limited (ASX:8VI) shareholders might be concerned after seeing the share price drop 24% in the last quarter. But over three years the performance has been really wonderful. The longer term view reveals that the share price is up 304% in that period. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The only way to form a view of whether the current price is justified is to consider the merits of the business itself.

Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for 8VI Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, 8VI Holdings moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

earnings-per-share-growth

It might be well worthwhile taking a look at our free report on 8VI Holdings’ earnings, revenue and cash flow.

A Different Perspective

Over the last year, 8VI Holdings shareholders took a loss of 16%. In contrast the market gained about 11%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 59% per year over three years. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. 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. Even so, be aware that 8VI Holdings is showing 4 warning signs in our investment analysis , you should know about…

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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