Further weakness as MKS Instruments (NASDAQ:MKSI) drops 6.2% this week, taking three-year losses to 23%
Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term MKS Instruments, Inc. (NASDAQ:MKSI) shareholders, since the share price is down 24% in the last three years, falling well short of the market return of around 32%. And the ride hasn't got any smoother in recent times over the last year, with the price 22% lower in that time. More recently, the share price has dropped a further 12% 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.
Since MKS Instruments has shed US$415m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for MKS Instruments
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the three years that the share price declined, MKS Instruments' earnings per share (EPS) dropped significantly, falling to a loss. Extraordinary items contributed to this situation. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into MKS Instruments' key metrics by checking this interactive graph of MKS Instruments's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 4.0% in the last year, MKS Instruments shareholders lost 22% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for MKS Instruments (of which 1 is a bit unpleasant!) you should know about.
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 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.
