Investors can approximate the average 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 Astec Industries, Inc. (NASDAQ:ASTE) share price is down 35% in the last year. That contrasts poorly with the market return of 8.1%. On the bright side, the stock is actually up 22% in the last three years. Furthermore, it's down 35% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
The recent uptick of 6.5% could be a positive sign of things to come, so let's take a lot at historical fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately Astec Industries reported an EPS drop of 62% for the last year. The share price fall of 35% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. Indeed, with a P/E ratio of 57.46 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 is of course excellent to see how Astec Industries has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Astec Industries stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Astec Industries had a tough year, with a total loss of 35% (including dividends), against a market gain of about 8.1%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Astec Industries is showing 2 warning signs in our investment analysis , you should know about...
If you are like me, then you will 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 US exchanges.
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.