Shareholders in CEVA (NASDAQ:CEVA) are in the red if they invested a year ago
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in CEVA, Inc. (NASDAQ:CEVA) have tasted that bitter downside in the last year, as the share price dropped 45%. That falls noticeably short of the market decline of around 25%. However, the longer term returns haven't been so bad, with the stock down 7.5% in the last three years. Shareholders have had an even rougher run lately, with the share price down 32% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for CEVA
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 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).
During the last year CEVA grew its earnings per share, moving from a loss to a profit.
The company was close to break-even last year, so earnings per share of US$0.038 strike us as less than amazing. And judging by the share price, the market is not too happy about it, either. Sentiment seems negative, despite the newfound profitability - so contrarians may want to take a look at the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that CEVA has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
We regret to report that CEVA shareholders are down 45% for the year. Unfortunately, that's worse than the broader market decline of 25%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. 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. 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. For instance, we've identified 1 warning sign for CEVA that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
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