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The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the PVH Corp. (NYSE:PVH) share price is down 28% in the last year. That contrasts poorly with the market return of 25%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 4.9% in three years. Unfortunately the share price momentum is still quite negative, with prices down 16% in thirty days.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for PVH
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Even though the PVH share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It's surprising to see the share price fall so much, despite the improved EPS. But we might find some different metrics explain the share price movements better.
With a low yield of 0.2% we doubt that the dividend influences the share price much. In contrast, the 4.8% drop in revenue is a real concern. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
PVH is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling PVH stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
PVH shareholders are down 28% for the year (even including dividends), but the market itself is up 25%. 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. Longer term investors wouldn't be so upset, since they would have made 1.0%, 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with PVH .