Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Aakash Exploration Services Limited (NSE:AAKASH) share price is down 45% in the last year. That's well bellow the market return of 9.4%. Aakash Exploration Services hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the Aakash Exploration Services 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.
Aakash Exploration Services 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).
Take a more thorough look at Aakash Exploration Services's financial health with this free report on its balance sheet.
A Different Perspective
Given that the market gained 9.4% in the last year, Aakash Exploration Services shareholders might be miffed that they lost 45%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 27%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.