The one-year shareholder returns and company earnings persist lower as Karnov Group (STO:KAR) stock falls a further 11% in past week

It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Karnov Group AB (publ) (STO:KAR) share price is down 32% in the last year. That contrasts poorly with the market decline of 2.0%. However, the longer term returns haven't been so bad, with the stock down 19% in the last three years. Furthermore, it's down 17% in about a quarter. That's not much fun for holders.

After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Karnov Group

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 Karnov Group reported an EPS drop of 28% for the last year. This proportional reduction in earnings per share isn't far from the 32% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. 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 Karnov Group's earnings, revenue and cash flow.

A Different Perspective

Karnov Group shareholders are down 32% for the year, falling short of the market return. Meanwhile, the broader market slid about 2.0%, likely weighing on the stock. The three-year loss of 6% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Karnov Group (of which 1 is concerning!) you should know about.

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 Swedish 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.