Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Midstates Petroleum Company, Inc. (NYSE:MPO) share price slid 38% over twelve months. That's disappointing when you consider the market returned 5.1%. Midstates Petroleum Company may have better days ahead, of course; we've only looked at a one year period. On top of that, the share price has dropped a further 32% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 last year Midstates Petroleum Company grew its earnings per share, moving from a loss to a profit. We're surprised that the share price is lower given that improvement. If the company can sustain the earnings growth, this might be an inflection point for the business, which would make right now a really interesting time to study it more closely.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Given that the market gained 5.1% in the last year, Midstates Petroleum Company shareholders might be miffed that they lost 38%. 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 10%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before deciding if you like the current share price, check how Midstates Petroleum Company scores on these 3 valuation metrics.
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 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.