You can invest in an index fund if you want to make sure your returns approximately match the overall market. In contrast individual stocks will provide a wide range of possible returns, and may fall short. For example, the Ford Motor Company (NYSE:E) share price fell 23% in the last year, slightly below the market decline of around 19%. The silver lining (for longer term investors) is that the stock is still 16% higher than it was three years ago. In the last ninety days we’ve seen the share price slide 31%. However, one could argue that the price has been influenced by the general market, which is down 17% in the same timeframe.
With the stock having lost 6.1% in the past week, it’s worth taking a look at business performance and seeing if there’s any red flags.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Ford Motor share price fell, it actually saw its earnings per share (EPS) improve by 189%. It’s quite possible that growth expectations may have been unreasonable in the past.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
Ford Motor’s revenue is actually up 4.3% 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Ford Motor is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We regret to report that Ford Motor shareholders are down 22% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 19%. 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. Longer term investors wouldn’t be so upset, since they would have made 5%, 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. 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. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Ford Motor (of which 1 doesn’t sit too well with us!) you should know about.
We will like Ford Motor better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.