The nature of investing is that you win some, and you lose some. Anyone who held Radius Residential Care Limited (NZSE:RAD) over the last year knows what a loser feels like. To wit the share price is down 60% in that time. Radius Residential Care hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.
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 markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Radius Residential Care had to report a 17% decline in EPS over the last year. The share price decline of 60% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. Of course, with a P/E ratio of 99.72, the market remains optimistic.
You can see below how EPS has 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. It might be well worthwhile taking a look at our free report on Radius Residential Care's earnings, revenue and cash flow.
A Different Perspective
Radius Residential Care shareholders are down 60% for the year (even including dividends), even worse than the market loss of 9.2%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 14%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Radius Residential Care better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Radius Residential Care (of which 4 are concerning!) you should know about.
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 NZ 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.