Innospec's (NASDAQ:IOSP one-year decrease in earnings delivers investors with a 31% loss

It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Innospec Inc. (NASDAQ:IOSP) share price slid 32% over twelve months. That's disappointing when you consider the market returned 21%. At least the damage isn't so bad if you look at the last three years, since the stock is down 25% in that time.

If the past week is anything to go by, investor sentiment for Innospec isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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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).

Unfortunately Innospec reported an EPS drop of 87% for the last year. The share price fall of 32% 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. With a P/E ratio of 94.06, it's fair to say the market sees an EPS rebound on the cards.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Innospec's key metrics by checking this interactive graph of Innospec's earnings, revenue and cash flow.

A Different Perspective

Investors in Innospec had a tough year, with a total loss of 31% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Innospec better, we need to consider many other factors. Take risks, for example - Innospec has 2 warning signs we think you should be aware of.

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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.