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RCM Technologies, Inc. (NASDAQ:RCMT) shareholders might be concerned after seeing the share price drop 11% in the last week. On the other hand, over the last twelve months the stock has delivered rather impressive returns. Indeed, the share price is up an impressive 179% in that time. So it is important to view the recent reduction in price through that lense. Only time will tell if there is still too much optimism currently reflected in the share price.
In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
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 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.
During the last year RCM Technologies grew its earnings per share, moving from a loss to a profit.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
However the year on year revenue growth of 14% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
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 know that RCM Technologies has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for RCM Technologies in this interactive graph of future profit estimates.
A Different Perspective
It's good to see that RCM Technologies has rewarded shareholders with a total shareholder return of 179% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand RCM Technologies better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with RCM Technologies , and understanding them should be part of your investment process.
We will like RCM Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.