131% earnings growth over 1 year has not materialized into gains for Finance House P.J.S.C (ADX:FH) shareholders over that period

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Finance House P.J.S.C. (ADX:FH) shareholders over the last year, as the share price declined 19%. That's disappointing when you consider the market returned 5.3%. Looking at the longer term, the stock is down 17% over three years.

If the past week is anything to go by, investor sentiment for Finance House P.J.S.C isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Finance House P.J.S.C

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).

Finance House P.J.S.C managed to increase earnings per share from a loss to a profit, over the last 12 months.

It's good to see it turn a profit, but we note it was reasonably close to profitability last year. Taking a look at the share price, it seems that investors were expecting better from the company. Given the improvement, though, contrarian investors might want to take a closer look.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market gained around 5.3% in the last year, Finance House P.J.S.C shareholders lost 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Finance House P.J.S.C better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Finance House P.J.S.C you should know about.

We will like Finance House P.J.S.C better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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