Yahoo Finance Did Changing Sentiment Drive MEDNAX's (NYSE:MD) Share Price Down A Worrying 68%?
If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of MEDNAX, Inc. (NYSE:MD) have had an unfortunate run in the last three years. So they might be feeling emotional about the 68% share price collapse, in that time. The more recent news is of little comfort, with the share price down 52% in a year. The falls have accelerated recently, with the share price down 14% in the last three months.
See our latest analysis for MEDNAX
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 three years that the share price fell, MEDNAX's earnings per share (EPS) dropped by 12% each year. This reduction in EPS is slower than the 31% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 8.74.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on MEDNAX's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
MEDNAX shareholders are down 52% for the year, but the market itself is up 8.1%. 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 17% 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. 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.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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 editorial-team@simplywallst.com. 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.
