We think intelligent long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the Sally Beauty Holdings, Inc. (NYSE:SBH) share price dropped 54% in the last half decade. We certainly feel for shareholders who bought near the top. And some of the more recent buyers are probably worried, too, with the stock falling 33% in the last year. Shareholders have had an even rougher run lately, with the share price down 30% in the last 90 days.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for Sally Beauty Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the five years over which the share price declined, Sally Beauty Holdings' earnings per share (EPS) dropped by 4.4% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 14% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 5.59 further reflects this reticence.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Sally Beauty Holdings' key metrics by checking this interactive graph of Sally Beauty Holdings's earnings, revenue and cash flow.

A Different Perspective

Sally Beauty Holdings shareholders are down 33% for the year, but the market itself is up 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Sally Beauty Holdings , and understanding them should be part of your investment process.

Of course Sally Beauty Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.