Arconic Corporation (NYSE:ARNC) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the reality of under-performance over the last twelve months. The cold reality is that the stock has dropped 22% in one year, under-performing the market.
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.
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. 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.
Unhappily, Arconic had to report a 300% decline in EPS over the last year. This was, in part, due to extraordinary items impacting earnings. And indeed the company lost money over the last twelve months. The share price fall of 22% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Arconic's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Arconic shareholders are down 22% for the year, even worse than the market loss of 8.9%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 11% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. Take risks, for example - Arconic has 1 warning sign we think you should be aware of.
Arconic is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.