It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Fox Factory Holding Corp. (NASDAQ:FOXF); the share price is down a whopping 79% in the last three years. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 59% in the last year. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days.

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.

View our latest analysis for Fox Factory Holding

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Fox Factory Holding saw its EPS decline at a compound rate of 59% per year, over the last three years. In comparison the 40% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. This positive sentiment is also reflected in the generous P/E ratio of 102.75.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Fox Factory Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Fox Factory Holding shareholders are down 59% for the year, but the market itself is up 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% 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. It's always interesting to track share price performance over the longer term. But to understand Fox Factory Holding better, we need to consider many other factors. Take risks, for example - Fox Factory Holding has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Fox Factory Holding 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.

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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.