The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term American Vanguard Corporation (NYSE:AVD) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 66% drop in the share price over that period. The more recent news is of little comfort, with the share price down 66% in a year. The falls have accelerated recently, with the share price down 44% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

Since American Vanguard has shed US$104m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

American Vanguard saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on American Vanguard's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

While the broader market gained around 19% in the last year, American Vanguard shareholders lost 65% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. To that end, you should learn about the 3 warning signs we've spotted with American Vanguard (including 2 which don't sit too well with us) .

American Vanguard 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.