Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Preformed Line Products Company (NASDAQ:PLPC) share price is down 16% in the last year. That falls noticeably short of the market return of around 7.4%. On the bright side, the stock is actually up 9.7% in the last three years. In the last ninety days we've seen the share price slide 30%.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Even though the Preformed Line Products share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.
Given the yield is quite low, at 1.6%, we doubt the dividend can shed much light on the share price. Preformed Line Products managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Preformed Line Products's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We've already covered Preformed Line Products's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Preformed Line Products's TSR, which was a 14% drop over the last year, was not as bad as the share price return.
A Different Perspective
Preformed Line Products shareholders are down 14% for the year (even including dividends) , but the market itself is up 7.4%. 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 3.8% 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's always interesting to track share price performance over the longer term. But to understand Preformed Line Products better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Preformed Line Products you should know about.
We will like Preformed Line Products better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.
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.
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. Thank you for reading.