The one-year underlying earnings growth at MP Materials (NYSE:MP) is promising, but the shareholders are still in the red over that time
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the MP Materials Corp. (NYSE:MP) share price is down 45% in the last year. That's disappointing when you consider the market declined 0.3%. We wouldn't rush to judgement on MP Materials because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 39% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
If the past week is anything to go by, investor sentiment for MP Materials isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
See our latest analysis for MP Materials
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate twelve months during which the MP Materials share price fell, it actually saw its earnings per share (EPS) improve by 17%. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
MP Materials' revenue is actually up 4.3% over the last year. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling MP Materials stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Given that the market gained 0.3% in the last year, MP Materials shareholders might be miffed that they lost 45%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 39%, 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
