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. Investors in WideOpenWest, Inc. (NYSE:WOW) have tasted that bitter downside in the last year, as the share price dropped 49%. That's disappointing when you consider the market returned 6.6%. We wouldn't rush to judgement on WideOpenWest because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 27% in the last 90 days.
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).
During the last year WideOpenWest grew its earnings per share, moving from a loss to a profit.
Earnings per share growth rates aren't particularly useful for comparing with the share price, when a company has moved from loss to profit. But we may find different metrics more enlightening.
Revenue was fairly steady year on year, which isn't usually such a bad thing. But the share price might be lower because the market expected a meaningful improvement, and got none.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on WideOpenWest
A Different Perspective
While WideOpenWest shareholders are down 49% for the year, the market itself is up 6.6%. 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. With the stock down 27% 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 want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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 firstname.lastname@example.org. 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.