As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term MicroStrategy Incorporated (NASDAQ:MSTR) shareholders, since the share price is down 35% in the last three years, falling well short of the market return of around 28%. The falls have accelerated recently, with the share price down 21% in the last three months. Of course, this share price action may well have been influenced by the 14% decline in the broader market, throughout the period.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
MicroStrategy saw its EPS decline at a compound rate of 19% per year, over the last three years. In comparison the 13% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on MicroStrategy's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 3.7% in the last year, MicroStrategy shareholders lost 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7.4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 MicroStrategy is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...
There are plenty of other companies that have insiders buying up shares. You probably do 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 US exchanges.
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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. 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. Thank you for reading.