While not a mind-blowing move, it is good to see that the Prosus N.V. (AMS:PRX) share price has gained 19% in the last three months. The stock is actually down over the last year. But it did better than its market, which fell 18%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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 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.
Unhappily, Prosus had to report a 71% decline in EPS over the last year. This fall in the EPS is significantly worse than the 12% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Prosus' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We can sympathize with Prosus about their 12% loss for the year ( including dividends), but the silver lining is that the broader market return was worse, at around -18%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's even worse than the annualised loss of 1.6% over the last three years. Whilst Baron Rothschild does say to "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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. Case in point: We've spotted 2 warning signs for Prosus you should be aware of, and 1 of them doesn't sit too well with us.
Prosus 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.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NL exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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