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Shoals Technologies Group, Inc. (NASDAQ:SHLS) shareholders should be happy to see the share price up 22% in the last month. But that's small comfort given the dismal price performance over the last year. Like an arid lake in a warming world, shareholder value has evaporated, with the share price down 55% in that time. It's not that amazing to see a bounce after a drop like that. You could argue that the sell-off was too severe.
While the stock has risen 21% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Unfortunately Shoals Technologies Group reported an EPS drop of 89% for the last year. This fall in the EPS is significantly worse than the 55% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. With a P/E ratio of 1.22k, it's fair to say the market sees an EPS rebound on the cards.
The image below shows how EPS has 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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We doubt Shoals Technologies Group shareholders are happy with the loss of 55% over twelve months. That falls short of the market, which lost 3.8%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 34% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 7 warning signs for Shoals Technologies Group you should be aware of, and 3 of them are a bit unpleasant.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.