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Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. For example, the Robex Resources Inc. (CVE:RBX) share price is up 44% in the last 1 year, clearly besting the market return of around 4.4% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 10% in the last three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
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.
Over the last twelve months, Robex Resources actually shrank its EPS by 29%. This was, in part, due to extraordinary items impacting earning in the last twelve months.
So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We think that the revenue growth of 18% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see below how earnings and revenue have 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. You can see what analysts are predicting for Robex Resources in this interactive graph of future profit estimates .
A Different Perspective
It's good to see that Robex Resources has rewarded shareholders with a total shareholder return of 44% in the last twelve months. Notably the five-year annualised TSR loss of 0.1% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 example, we've discovered 2 warning signs for Robex Resources that you should be aware of before investing here.