While not a mind-blowing move, it is good to see that the IPL Plastics Inc. (TSE:IPLP) share price has gained 18% in the last three months. But that doesn't change the reality of under-performance over the last twelve months. In fact the stock is down 14% in the last year, well below the market return.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Even though the IPL Plastics share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
Revenue was pretty flat on last year, which isn't too bad. But the share price might be lower because the market expected a meaningful improvement, and got none.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on IPL Plastics
A Different Perspective
While IPL Plastics shareholders are down 14% for the year, the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 18%, in the last ninety days. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for IPL Plastics you should be aware of, and 1 of them is significant.
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 CA exchanges.
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