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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in DCD Media Plc (LON:DCD) have tasted that bitter downside in the last year, as the share price dropped 48%. That's well bellow the market return of 2.3%. Longer term investors have fared much better, since the share price is up 14% in three years. The falls have accelerated recently, with the share price down 23% in the last three months.
Check out our latest analysis for DCD Media
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately DCD Media reported an EPS drop of 60% for the last year. The share price fall of 48% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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. This free interactive report on DCD Media's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Investors in DCD Media had a tough year, with a total loss of 48%, against a market gain of about 2.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.1% per year over five years. 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. Before forming an opinion on DCD Media you might want to consider these 3 valuation metrics.
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.