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It's easy to match the overall 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 Ctrip.com International, Ltd. (NASDAQ:CTRP) share price is down 35% in the last year. That's disappointing when you consider the market returned 2.9%. At least the damage isn't so bad if you look at the last three years, since the stock is down 14% in that time. The falls have accelerated recently, with the share price down 20% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
During the unfortunate twelve months during which the Ctrip.com International share price fell, it actually saw its earnings per share (EPS) improve by 44%. It could be that the share price was previously over-hyped. It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
Ctrip.com International's revenue is actually up 18% 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 shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
Ctrip.com International is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Ctrip.com International will earn in the future (free analyst consensus estimates)
A Different Perspective
While the broader market gained around 2.9% in the last year, Ctrip.com International shareholders lost 35%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 2.5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is Ctrip.com International cheap compared to other companies? These 3 valuation measures might help you decide.
If you are like me, then you will 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 US 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.