Yahoo Finance Reliance Worldwide's (ASX:RWC) earnings have declined over year, contributing to shareholders 50% loss
Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Reliance Worldwide Corporation Limited (ASX:RWC) share price is down 51% in the last year. That falls noticeably short of the market decline of around 6.2%. However, the longer term returns haven't been so bad, with the stock down 25% in the last three years. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
While the stock has risen 8.0% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
See our latest analysis for Reliance Worldwide
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Reliance Worldwide had to report a 2.5% decline in EPS over the last year. This reduction in EPS is not as bad as the 51% share price fall. So it seems the market was too confident about the business, a year ago.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider 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 Reliance Worldwide's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Reliance Worldwide shareholders are down 50% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.2%. Having said that, it's 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 may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. 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. 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. For instance, we've identified 2 warning signs for Reliance Worldwide (1 is concerning) that you should be aware of.
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 AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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