Many investors gauge successful investing by outperforming the market average over the long haul. However, the risk of selecting individual stocks is the potential to invest in underperforming companies.
Unfortunately, this has been the reality for long-term shareholders of Intel Corporation (NASDAQ: INTC), as the stock price has declined by 42% in the past three years, significantly lagging behind the market return of approximately 12%.
Furthermore, it has dropped by 30% in just about a quarter, which is disheartening for shareholders.
After experiencing a 5.8% decline in the past week, it’s prudent to go into the company’s fundamentals to glean insights from its past performance.
While markets serve as a potent pricing mechanism, share prices reflect investor sentiment, not just underlying business performance.
One method, albeit imperfect, to assess changes in sentiment toward a company is to compare its earnings per share (EPS) with the share price.
Over the three years of share price decline, Intel‘s earnings per share (EPS) plummeted by 57% annually. This decrease in EPS is more severe than the 17% compound annual share price decline.
Therefore, the market may not be overly concerned about the EPS figure at present, or it may have previously factored in some of the decline. This optimistic sentiment is also evident in the high P/E ratio of 86.20.
It’s encouraging to note significant insider buying in the last three months, which is a positive sign. However, we believe that trends in earnings and revenue growth are even more critical factors to consider.
For those interested in further examining the stock, a free interactive report on Intel’s earnings, revenue, and cash flow serves as an excellent starting point.
