Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) share price is down 40% in the last year. That's well below the market decline of 4.6%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 24% in three years. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.
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...' 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.
Unfortunately ANI Pharmaceuticals reported an EPS drop of 61% for the last year. This fall in the EPS is significantly worse than the 40% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 82.59, it's fair to say the market sees an EPS rebound on the cards.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on ANI Pharmaceuticals's earnings, revenue and cash flow.
A Different Perspective
We regret to report that ANI Pharmaceuticals shareholders are down 40% for the year. Unfortunately, that's worse than the broader market decline of 4.6%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7.3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand ANI Pharmaceuticals better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for ANI Pharmaceuticals (of which 1 makes us a bit uncomfortable!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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