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. For example, the FD Technologies Plc (LON:FDP) share price is down 41% in the last year. That's well below the market return of 14%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 14% in three years. The falls have accelerated recently, with the share price down 14% in the last three months.
After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unhappily, FD Technologies had to report a 95% decline in EPS over the last year. The share price fall of 41% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster. Indeed, with a P/E ratio of 638.55 there is obviously some real optimism that earnings will bounce back.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of FD Technologies' earnings, revenue and cash flow.
A Different Perspective
FD Technologies shareholders are down 41% for the year, but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand FD Technologies better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with FD Technologies , and understanding them should be part of your investment process.
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.
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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.