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FD Technologies Plc (LON:FDP) shareholders will doubtless be very grateful to see the share price up 51% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 24% in the last three years, falling well short of the market return.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for FD Technologies
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
During the three years that the share price fell, FD Technologies' earnings per share (EPS) dropped by 60% each year. This fall in the EPS is worse than the 9% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines. With a P/E ratio of 824.90, it's fair to say the market sees a brighter future for the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
FD Technologies shareholders are down 19% for the year, but the market itself is up 3.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 3 warning signs for FD Technologies you should be aware of.
FD Technologies is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.