Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Wagners Holding Company Limited (ASX:WGN) have tasted that bitter downside in the last year, as the share price dropped 41%. That's well below the market decline of 8.7%. We wouldn't rush to judgement on Wagners Holding because we don't have a long term history to look at. More recently, the share price has dropped a further 16% in a month.
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.
Unhappily, Wagners Holding had to report a 72% decline in EPS over the last year. This fall in the EPS is significantly worse than the 41% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Wagners Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We doubt Wagners Holding shareholders are happy with the loss of 39% over twelve months. That falls short of the market, which lost 8.7%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Putting aside the last twelve months, it's good to see the share price has rebounded by 7.6%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. It's always interesting to track share price performance over the longer term. But to understand Wagners Holding better, we need to consider many other factors. For instance, we've identified 5 warning signs for Wagners Holding (2 are a bit unpleasant) that you should be aware of.
Wagners Holding is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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. 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.
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