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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Inter-Rock Minerals Inc. (CVE:IRO) shareholders over the last year, as the share price declined 40%. That falls noticeably short of the market return of around 6.6%. Inter-Rock Minerals may have better days ahead, of course; we've only looked at a one year period. The falls have accelerated recently, with the share price down 27% in the last three months. 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.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unhappily, Inter-Rock Minerals had to report a 45% decline in EPS over the last year. This proportional reduction in earnings per share isn't far from the 40% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Inter-Rock Minerals's key metrics by checking this interactive graph of Inter-Rock Minerals's earnings, revenue and cash flow.
A Different Perspective
While Inter-Rock Minerals shareholders are down 40% for the year, the market itself is up 6.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 27% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 email@example.com. 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.