The nature of investing is that you win some, and you lose some. And there's no doubt that TechTarget, Inc. (NASDAQ:TTGT) stock has had a really bad year. In that relatively short period, the share price has plunged 57%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 28% in three years. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.
After losing 8.5% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the last year TechTarget saw its earnings per share increase strongly. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As you can imagine, the share price action therefore perturbs us. Some different data might shed some more light on the situation.
Revenue was fairly steady year on year, which isn't usually such a bad thing. But the share price might be lower because the market expected a meaningful improvement, and got none.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how TechTarget has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
TechTarget shareholders are down 57% for the year, but the market itself is up 8.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 4%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that TechTarget is showing 2 warning signs in our investment analysis , you should know about...
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 American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.