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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Kongsberg Automotive ASA (OB:KOA) share price slid 30% over twelve months. That falls noticeably short of the market return of around -0.8%. On the bright side, the stock is actually up 23% in the last three years. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.
Check out our latest analysis for Kongsberg Automotive
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 last year Kongsberg Automotive saw its earnings per share increase strongly. While the business is unlikely to sustain such a high growth rate for long, it's great to see. As a result, we're surprised to see the weak share price. Some different data might shed some more light on the situation.
Kongsberg Automotive 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.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. It might be well worthwhile taking a look at our free report on Kongsberg Automotive's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 0.8% in the twelve months, Kongsberg Automotive shareholders did even worse, losing 30%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.5% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.