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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. Unfortunately the TT Electronics plc (LON:TTG) share price slid 46% over twelve months. That falls noticeably short of the market decline of around 8.8%. We note that it has not been easy for shareholders over three years, either; the share price is down 38% in that time. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 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.
See our latest analysis for TT Electronics
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 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.
During the unfortunate twelve months during which the TT Electronics share price fell, it actually saw its earnings per share (EPS) improve by 7.9%. It's quite possible that growth expectations may have been unreasonable in the past.
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.
TT Electronics managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
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. If you are thinking of buying or selling TT Electronics stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We regret to report that TT Electronics shareholders are down 44% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 8.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand TT Electronics better, we need to consider many other factors. Take risks, for example - TT Electronics has 1 warning sign we think you should be aware of.