While it may not be enough for some shareholders, we think it is good to see the Roots Corporation (TSE:ROOT) share price up 17% in a single quarter. But that’s small comfort given the dismal price performance over the last year. During that time the share price has sank like a stone, descending 60%. The share price recovery is not so impressive when you consider the fall. It may be that the fall was an overreaction.
Check out our latest analysis for Roots
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
Unfortunately Roots reported an EPS drop of 35% for the last year. This reduction in EPS is not as bad as the 60% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Roots’s earnings, revenue and cash flow.
A Different Perspective
Given that the market gained 7.9% in the last year, Roots shareholders might be miffed that they lost 60%. While the aim is to do better than that, it’s worth recalling that even great long-term investments sometimes underperform for a year or more. Putting aside the last twelve months, it’s good to see the share price has rebounded by 17%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it’s the start of a new trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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