Shareholders in Pure Cycle (NASDAQ:PCYO) are in the red if they invested three years ago
As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Pure Cycle Corporation (NASDAQ:PCYO) shareholders have had that experience, with the share price dropping 12% in three years, versus a market return of about 18%. More recently, the share price has dropped a further 8.8% in a month.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Pure Cycle
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Pure Cycle saw its EPS decline at a compound rate of 12% per year, over the last three years. This fall in the EPS is worse than the 4% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 51.21.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
Pure Cycle shareholders gained a total return of 1.5% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 0.3% over half a decade It is possible that returns will improve along with the business fundamentals. Before spending more time on Pure Cycle it might be wise to click here to see if insiders have been buying or selling shares.
But note: Pure Cycle may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
