It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in National Vision Holdings, Inc. (NASDAQ:EYE) have tasted that bitter downside in the last year, as the share price dropped 45%. That's well bellow the market return of 9.3%. We wouldn't rush to judgement on National Vision Holdings because we don't have a long term history to look at. The falls have accelerated recently, with the share price down 26% in the last three months.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, National Vision Holdings had to report a 80% decline in EPS over the last year. This fall in the EPS is significantly worse than the 45% the share price fall. It may have been that the weak EPS was not as bad as some had feared. Indeed, with a P/E ratio of 123.65 there is obviously some real optimism that earnings will bounce back.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Given that the market gained 9.3% in the last year, National Vision Holdings shareholders might be miffed that they lost 45%. 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. The share price decline has continued throughout the most recent three months, down 26%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. If you would like to research National Vision Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like National Vision Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 firstname.lastname@example.org. 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.