Yahoo Finance If You Had Bought Qantas Airways' (ASX:QAN) Shares A Year Ago You Would Be Down 25%
The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Qantas Airways Limited (ASX:QAN) have tasted that bitter downside in the last year, as the share price dropped 25%. That's disappointing when you consider the market returned 4.8%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 5.5% in three years. The good news is that the stock is up 3.4% in the last week.
See our latest analysis for Qantas Airways
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 Qantas Airways saw its earnings per share drop below zero. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. We hope for shareholders' sake that the company becomes profitable again soon.
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. 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 Qantas Airways' earnings, revenue and cash flow.
A Different Perspective
Investors in Qantas Airways had a tough year, with a total loss of 25%, against a market gain of about 4.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Qantas Airways has 2 warning signs (and 1 which is potentially serious) we think you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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