Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the Tutor Perini Corporation (NYSE:TPC) share price managed to fall 65% over five long years. That’s not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 39%. The falls have accelerated recently, with the share price down 19% in the last three months. But this could be related to the weak market, which is down 16% in the same period.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
During the five years over which the share price declined, Tutor Perini’s earnings per share (EPS) dropped by 11% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 19% per year, over the period. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 9.01.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
We regret to report that Tutor Perini shareholders are down 39% for the year. Unfortunately, that’s worse than the broader market decline of 9.8%. 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 11% over the last half decade. We realise that Baron Rothschild 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 business. It’s always interesting to track share price performance over the longer term. But to understand Tutor Perini better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we’ve spotted with Tutor Perini (including 1 which is a bit concerning) .
If you are like me, then you will 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 US 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.