Earnings are growing at Exponent (NASDAQ:EXPO) but shareholders still don't like its prospects

Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Exponent, Inc. (NASDAQ:EXPO) share price is down 20% in the last year. That falls noticeably short of the market return of around 9.7%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 15% in three years. The falls have accelerated recently, with the share price down 18% in the last three months. But this could be related to the weak market, which is down 7.7% in the same period.

After losing 3.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

We check all companies for important risks. See what we found for Exponent in our free report.

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 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.

During the unfortunate twelve months during which the Exponent share price fell, it actually saw its earnings per share (EPS) improve by 3.7%. Of course, the situation might betray previous over-optimism about growth.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.

Given the yield is quite low, at 1.6%, we doubt the dividend can shed much light on the share price. Revenue was fairly steady year on year, which isn't usually such a bad thing. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Exponent

A Different Perspective

While the broader market gained around 9.7% in the last year, Exponent shareholders lost 19% (even including dividends). 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 4% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Exponent in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

We will like Exponent better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.