While not a mind-blowing move, it is good to see that the Sonos, Inc. (NASDAQ:SONO) share price has gained 29% in the last three months. But that doesn't change the reality of under-performance over the last twelve months. After all, the share price is down 29% in the last year, significantly under-performing the market.
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).
Sonos managed to increase earnings per share from a loss to a profit, over the last 12 months. Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. But we may find different metrics more enlightening.
Sonos managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have 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. You can see what analysts are predicting for Sonos in this interactive graph of future profit estimates.
A Different Perspective
Sonos shareholders are down 29% for the year, even worse than the market loss of 1.1%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. Putting aside the last twelve months, it's good to see the share price has rebounded by 29%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. Before deciding if you like the current share price, check how Sonos scores on these 3 valuation metrics.
We will like Sonos 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.
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