Positive earnings growth hasn't been enough to get Avantor (NYSE:AVTR) shareholders a favorable return over the last year
It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Avantor, Inc. (NYSE:AVTR) shareholders over the last year, as the share price declined 35%. That's well below the market return of 16%. On the other hand, the stock is actually up 13% over three years.
While the stock has risen 4.0% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
See our latest analysis for Avantor
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Even though the Avantor share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.
Revenue was fairly steady year on year, which isn't usually such a bad thing. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Avantor will earn in the future (free profit forecasts).
A Different Perspective
Over the last year, Avantor shareholders took a loss of 35%. In contrast the market gained about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 4% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Avantor (of which 1 is a bit concerning!) you should know about.
Avantor is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
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