Earnings growth of 325% YoY did not materialize in gains for United Company RUSAL International (HKG: 486) shareholders during this period
Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can earn higher profits, but you also run the risk of underperformance. For example, the United Company RUSAL, International Public Limited Company (HKG:486) the stock price is down 43% over the past year. This is disappointing when you consider that the market is down 21%. On the bright side, the stock is actually at the top 5.3% over the last three years. Shareholders have had an even tougher race lately, with the share price falling 23% in the past 90 days.
Given that United Company RUSAL International has lost $2.6 billion in value over the past 7 days, let’s see if the longer-term decline was driven by the company’s economics.
Check out our latest analysis for United Company RUSAL International
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that are too reactive and that investors are not always rational. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
In the unfortunate twelve months in which the United Company RUSAL International stock price fell, it did indeed see its earnings per share (EPS) improve by 325%. It could be that the share price was previously overhyped.
The divergence between EPS and share price is quite noticeable over the year. It is therefore easy to justify a look at other measures.
The turnover of United Company RUSAL International has actually increased by 40% compared to last year. Since the fundamentals do not easily explain the stock price drop, there could be an opportunity if the market has overreacted.
The company’s revenues and profits (over time) are shown in the image below (click to see exact figures).
We know that United Company RUSAL International has recently improved its results, but what does the future hold? So it makes a lot of sense to check what analysts think United Company RUSAL International will earn in the future (free earnings predictions).
A different perspective
We regret to report that United Company RUSAL International shareholders are down 43% for the year. Unfortunately, this is worse than the general market decline of 21%. That said, it is 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 capped a bad run, with shareholders facing a total loss of 1.4% per year over five years. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors must first make sure they are buying a high quality company. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we have identified 4 warning signs for United Company RUSAL International (3 make us uncomfortable) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider buying, might be just the ticket.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on HK exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.