If You Had Bought PSP Projects' (NSE:PSPPROJECT) Shares A Year Ago You Would Be Down 28%

The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by PSP Projects Limited (NSE:PSPPROJECT) shareholders over the last year, as the share price declined 28%. That falls noticeably short of the market decline of around 0.4%. At least the damage isn't so bad if you look at the last three years, since the stock is down 10% in that time. It's down 1.5% in the last seven days.

Check out our latest analysis for PSP Projects

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Even though the PSP Projects share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.

With a low yield of 1.3% we doubt that the dividend influences the share price much. PSP Projects' revenue is actually up 16% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on PSP Projects

A Different Perspective

Over the last year, PSP Projects shareholders took a loss of 28%, including dividends. In contrast the market gained about 0.4%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 2.3% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for PSP Projects you should know about.

PSP Projects is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. 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.
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