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It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Spectris plc (LON:SXS) have tasted that bitter downside in the last year, as the share price dropped 35%. That falls noticeably short of the market return of around 7.1%. We note that it has not been easy for shareholders over three years, either; the share price is down 33% in that time.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Spectris
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 Spectris share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
In contrast, the 8.4% 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.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
While the broader market gained around 7.1% in the last year, Spectris shareholders lost 33% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.0% 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Spectris (of which 1 is potentially serious!) you should know about.