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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the On Deck Capital, Inc. (NYSE:ONDK) share price is down 47% in the last year. That contrasts poorly with the market return of 7.0%. At least the damage isn't so bad if you look at the last three years, since the stock is down 28% in that time. The falls have accelerated recently, with the share price down 27% in the last three months.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
On Deck Capital managed to increase earnings per share from a loss to a profit, over the last 12 months. Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. So it makes sense to check out some other factors.
On Deck Capital 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for On Deck Capital in this interactive graph of future profit estimates.
A Different Perspective
On Deck Capital shareholders are down 47% for the year, but the broader market is up 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 10% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of On Deck Capital by clicking this link.
On Deck Capital is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.