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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. That downside risk was realized by MKS Instruments, Inc. (NASDAQ:MKSI) shareholders over the last year, as the share price declined 35%. That's disappointing when you consider the market declined 18%. On the bright side, the stock is actually up 7.0% in the last three years. Furthermore, it's down 20% in about a quarter. That's not much fun for holders.
After losing 4.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for MKS Instruments
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.
Even though the MKS Instruments 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.
Given the yield is quite low, at 0.9%, we doubt the dividend can shed much light on the share price. MKS Instruments' revenue is actually up 12% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for MKS Instruments in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 18% in the twelve months, MKS Instruments shareholders did even worse, losing 34% (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. Longer term investors wouldn't be so upset, since they would have made 3%, 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for MKS Instruments you should know about.