Pro-Dex's (NASDAQ:PDEX) earnings growth rate lags the 10.0% CAGR delivered to shareholders

The last three months have been tough on Pro-Dex, Inc. (NASDAQ:PDEX) shareholders, who have seen the share price decline a rather worrying 41%. In contrast the stock is up over the last three years. Arguably you'd have been better off buying an index fund, because the gain of 33% in three years isn't amazing.

Since the long term performance has been good but there's been a recent pullback of 22%, let's check if the fundamentals match the share price.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Pro-Dex achieved compound earnings per share growth of 30% per year. The average annual share price increase of 10% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.64.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Pro-Dex has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Pro-Dex shareholders are down 5.3% for the year, but the market itself is up 16%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.6% over the last half decade. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Pro-Dex (of which 1 is a bit concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.