The past year for Cognyte Software (NASDAQ:CGNT) investors has not been profitable
Cognyte Software Ltd. (NASDAQ:CGNT) shareholders should be happy to see the share price up 10% in the last month. But that's small comfort given the dismal price performance over the last year. Specifically, the stock price slipped by 56% in that time. Some might say the recent bounce is to be expected after such a bad drop. Of course, it could be that the fall was overdone.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Cognyte Software
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 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.
Unfortunately Cognyte Software reported an EPS drop of 87% for the last year. This fall in the EPS is significantly worse than the 56% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. Indeed, with a P/E ratio of 425.02 there is obviously some real optimism that earnings will bounce back.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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 9.0% in the last year, Cognyte Software shareholders might be miffed that they lost 56%. 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. With the stock down 22% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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 Cognyte Software is showing 3 warning signs in our investment analysis , you should know about...
But note: Cognyte Software may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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. 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.
