U.S. Markets close in 1 hr 12 mins

Volatility 101: Should Mammoth Energy Services (NASDAQ:TUSK) Shares Have Dropped 48%?

Simply Wall St

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. Unfortunately the Mammoth Energy Services, Inc. (NASDAQ:TUSK) share price slid 48% over twelve months. That falls noticeably short of the market return of around 8.2%. Mammoth Energy Services hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.

Check out our latest analysis for Mammoth Energy Services

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.

During the unfortunate twelve months during which the Mammoth Energy Services share price fell, it actually saw its earnings per share (EPS) improve by 272%. It could be that the share price was previously over-hyped. It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.

Mammoth Energy Services managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

NasdaqGS:TUSK Income Statement, April 18th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. You can see what analysts are predicting for Mammoth Energy Services in this interactive graph of future profit estimates.

A Different Perspective

While Mammoth Energy Services shareholders are down 48% for the year (even including dividends), the market itself is up 8.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 22%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Mammoth Energy Services it might be wise to click here to see if insiders have been buying or selling shares.

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 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. Thank you for reading.