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Volatility 101: Should Apollo Medical Holdings (NASDAQ:AMEH) Shares Have Dropped 11%?

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It's easy to match the overall 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. Unfortunately the Apollo Medical Holdings, Inc. (NASDAQ:AMEH) share price slid 11% over twelve months. That's disappointing when you consider the market returned 6.5%. Apollo Medical Holdings may have better days ahead, of course; we've only looked at a one year period. It's up 2.0% in the last seven days.

Check out our latest analysis for Apollo Medical Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Apollo Medical Holdings reported an EPS drop of 86% for the last year. This fall in the EPS is significantly worse than the 11% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult. Indeed, with a P/E ratio of 139.36 there is obviously some real optimism that earnings will bounce back.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NasdaqCM:AMEH Past and Future Earnings, March 2nd 2020
NasdaqCM:AMEH Past and Future Earnings, March 2nd 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

While Apollo Medical Holdings shareholders are down 11% for the year, the market itself is up 6.5%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 5.1%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Apollo Medical Holdings has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.