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Investors can approximate the average 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. Investors in Renasant Corporation (NASDAQ:RNST) have tasted that bitter downside in the last year, as the share price dropped 33%. That falls noticeably short of the market decline of around 8.4%. However, the longer term returns haven't been so bad, with the stock down 18% in the last three years. The falls have accelerated recently, with the share price down 19% in the last three months. But this could be related to the weak market, which is down 9.8% in the same period.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
Even though the Renasant 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.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
In contrast, the 7.8% drop in revenue is a real concern. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Renasant stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market lost about 8.4% in the twelve months, Renasant shareholders did even worse, losing 32% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before forming an opinion on Renasant you might want to consider these 3 valuation metrics.
But note: Renasant 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 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.