Rocket Companies' (NYSE:RKT one-year decrease in earnings delivers investors with a 34% loss

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Rocket Companies, Inc. (NYSE:RKT) share price slid 39% over twelve months. That contrasts poorly with the market decline of 10%. Because Rocket Companies hasn't been listed for many years, the market is still learning about how the business performs. Even worse, it's down 16% in about a month, which isn't fun at all.

If the past week is anything to go by, investor sentiment for Rocket Companies isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Rocket Companies

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Unfortunately Rocket Companies reported an EPS drop of 71% for the last year. This fall in the EPS is significantly worse than the 39% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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. This free interactive report on Rocket Companies' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Rocket Companies the TSR over the last 1 year was -34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Rocket Companies shareholders are down 34% for the year (even including dividends), even worse than the market loss of 10%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. It's great to see a nice little 0.5% rebound in the last three months. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand Rocket Companies better, we need to consider many other factors. Take risks, for example - Rocket Companies has 2 warning signs we think you should be aware of.

Rocket Companies 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 US 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.