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The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Domain Holdings Australia Limited (ASX:DHG) shareholders over the last year, as the share price declined 44%. That contrasts poorly with the market decline of 1.0%. At least the damage isn't so bad if you look at the last three years, since the stock is down 10% in that time. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for Domain Holdings Australia
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...' 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 Domain Holdings Australia share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
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.
Domain Holdings Australia 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).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market lost about 1.0% in the twelve months, Domain Holdings Australia shareholders did even worse, losing 43% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.9% per year over five years. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Domain Holdings Australia that you should be aware of.