This month, we saw the dotdigital Group Plc (LON:DOTD) up an impressive 33%. But that isn't much consolation to those who have suffered through the declines of the last year. During that time the share price has sank like a stone, descending 51%. It's not that amazing to see a bounce after a drop like that. Of course, it could be that the fall was overdone.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Even though the dotdigital Group share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It seems quite likely that the market was expecting higher growth from the stock. But other metrics might shed some light on why the share price is down.
With a low yield of 1.1% we doubt that the dividend influences the share price much. dotdigital Group's revenue is actually up 8.1% 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.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. If you are thinking of buying or selling dotdigital Group stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market lost about 5.2% in the twelve months, dotdigital Group shareholders did even worse, losing 50% (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 0.4%, 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of dotdigital Group by clicking this link.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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