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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. For example, the Netwealth Group Limited (ASX:NWL) share price is down 10% in the last year. That's disappointing when you consider the market returned 8.4%. Because Netwealth Group hasn't been listed for many years, the market is still learning about how the business performs. It's down 26% in about a quarter.
Check out our latest analysis for Netwealth Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the Netwealth Group share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. 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.
With a low yield of 1.5% we doubt that the dividend influences the share price much. Netwealth Group's revenue is actually up 25% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Netwealth Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Given that the market gained 8.4% in the last year, Netwealth Group shareholders might be miffed that they lost 8.6% (even including dividends). While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. Notably, the loss over the last year isn't as bad as the 26% drop in the last three months. So it seems like some holders have been dumping the stock of late - and that's not bullish. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.