The past year for Primoris Services (NASDAQ:PRIM) investors has not been profitable
It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Primoris Services Corporation (NASDAQ:PRIM) shareholders over the last year, as the share price declined 24%. That's well below the market decline of 16%. On the other hand, the stock is actually up 7.7% over three years. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Primoris Services
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Unfortunately Primoris Services reported an EPS drop of 15% for the last year. This reduction in EPS is not as bad as the 24% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 10.74.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Primoris Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 16% in the twelve months, Primoris Services shareholders did even worse, losing 23% (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.7% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Primoris Services better, we need to consider many other factors. Take risks, for example - Primoris Services has 1 warning sign we think you should be aware of.
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 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.
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
