Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Vivo Energy plc (LON:VVO) shareholders over the last year, as the share price declined 33%. That falls noticeably short of the market return of around -0.7%. Vivo Energy may have better days ahead, of course; we’ve only looked at a one year period. The falls have accelerated recently, with the share price down 10% in the last three months.
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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).
Unfortunately Vivo Energy reported an EPS drop of 100% for the last year. The share price fall of 33% isn’t as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
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. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Vivo Energy’s earnings, revenue and cash flow.
A Different Perspective
We doubt Vivo Energy shareholders are happy with the loss of 33% over twelve months (even including dividends). That falls short of the market, which lost 0.7%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. The share price decline has continued throughout the most recent three months, down 10%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Vivo Energy by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.