The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by SPX FLOW, Inc. (NYSE:FLOW) shareholders over the last year, as the share price declined 39%. That’s well bellow the market return of 2.6%. The silver lining (for longer term investors) is that the stock is still 34% higher than it was three years ago. There was little comfort for shareholders in the last week as the price declined a further 3.3%.
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 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).
Unhappily, SPX FLOW had to report a 6.1% decline in EPS over the last year. The share price decline of 39% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into SPX FLOW’s key metrics by checking this interactive graph of SPX FLOW’s earnings, revenue and cash flow.
A Different Perspective
Over the last year, SPX FLOW shareholders took a loss of 39%. In contrast the market gained about 2.6%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 10% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Is SPX FLOW cheap compared to other companies? These 3 valuation measures might help you decide.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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.