The simplest way to benefit from a rising market is to buy 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 ZipRecruiter, Inc. (NYSE:ZIP) share price is down 18% in the last year. That falls noticeably short of the market return of around 5.8%. We wouldn't rush to judgement on ZipRecruiter because we don't have a long term history to look at. In the last ninety days we've seen the share price slide 29%. 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.
If the past week is anything to go by, investor sentiment for ZipRecruiter isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 ZipRecruiter saw its earnings per share increase strongly. We don't think the growth guide to the sustainable growth rate in this case, but we do think this sort of increase is impressive. So we are surprised the share price is down. Some different data might shed some more light on the situation.
Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think ZipRecruiter will earn in the future (free profit forecasts).
A Different Perspective
Given that the market gained 5.8% in the last year, ZipRecruiter shareholders might be miffed that they lost 18%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. It's worth noting that the last three months did the real damage, with a 29% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 4 warning signs for ZipRecruiter (2 are a bit unpleasant) that you should be aware of.
But note: ZipRecruiter may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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