Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) share price is down 18% in the last year. That's well bellow the market return of 3.8%. Solaris Oilfield Infrastructure may have better days ahead, of course; we've only looked at a one year period. The silver lining is that the stock is up 3.2% in about a week.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Even though the Solaris Oilfield Infrastructure 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. It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
Solaris Oilfield Infrastructure managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
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. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Given that the market gained 3.8% in the last year, Solaris Oilfield Infrastructure shareholders might be miffed that they lost 16% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 9.1% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. If you would like to research Solaris Oilfield Infrastructure in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.