While it may not be enough for some shareholders, we think it is good to see the Parsons Corporation (NYSE:PSN) share price up 15% in a single quarter. But in truth the last year hasn't been good for the share price. After all, the share price is down 14% in the last year, significantly under-performing the market.
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 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.
Unhappily, Parsons had to report a 31% decline in EPS over the last year. The share price fall of 14% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Parsons' earnings, revenue and cash flow.
A Different Perspective
While Parsons shareholders are down 14% for the year, the market itself is up 26%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 15% 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
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.
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