Update: RHI Magnesita (LON:RHIM) Stock Gained 29% In The Last Year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the RHI Magnesita N.V. (LON:RHIM) share price is up 29% in the last year, clearly besting the market decline of around 6.8% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! In contrast, the longer term returns are negative, since the share price is 6.0% lower than it was three years ago.

Check out our latest analysis for RHI Magnesita

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last year, RHI Magnesita actually saw its earnings per share drop 64%.

This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

RHI Magnesita's revenue actually dropped 18% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think RHI Magnesita will earn in the future (free profit forecasts).

A Different Perspective

Pleasingly, RHI Magnesita's total shareholder return last year was 31%. That gain actually surpasses the 0.2% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting RHI Magnesita on your watchlist. 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. For example, we've discovered 4 warning signs for RHI Magnesita that you should be aware of before investing here.

RHI Magnesita is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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