The past year for FormFactor (NASDAQ:FORM) investors has not been profitable
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in FormFactor, Inc. (NASDAQ:FORM) have tasted that bitter downside in the last year, as the share price dropped 47%. That falls noticeably short of the market decline of around 21%. Longer term investors have fared much better, since the share price is up 0.5% in three years. The falls have accelerated recently, with the share price down 31% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
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 FormFactor
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 FormFactor share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
FormFactor's revenue is actually up 3.3% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that FormFactor has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling FormFactor stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We regret to report that FormFactor shareholders are down 47% for the year. Unfortunately, that's worse than the broader market decline of 21%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand FormFactor better, we need to consider many other factors. For instance, we've identified 1 warning sign for FormFactor that you should be aware of.
Of course FormFactor may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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