The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of Dycom Industries, Inc. (NYSE:DY) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 56%. However, the longer term returns haven’t been so bad, with the stock down 21% in the last three years. Even worse, it’s down 20% in about a month, which isn’t fun at all. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Dycom Industries had to report a 59% decline in EPS over the last year. This change in EPS is remarkably close to the 56% 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. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Dycom Industries’s earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 3.4% in the last year, Dycom Industries shareholders lost 56%. 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. On the bright side, long term shareholders have made money, with a gain of 9.1% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
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 US 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 firstname.lastname@example.org. 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.