Yahoo Finance Positive earnings growth hasn't been enough to get SJW Group (NYSE:SJW) shareholders a favorable return over the last year
Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in SJW Group (NYSE:SJW) have tasted that bitter downside in the last year, as the share price dropped 29%. That's well below the market return of 24%. However, the longer term returns haven't been so bad, with the stock down 16% in the last three years.
Although the past week has been more reassuring for shareholders, they're still in the red over the last year, so let's see if the underlying business has been responsible for the decline.
See our latest analysis for SJW Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Even though the SJW Group share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
SJW Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think SJW Group will earn in the future (free profit forecasts).
A Different Perspective
While the broader market gained around 24% in the last year, SJW Group shareholders lost 27% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 0.1%, each year, over five years. 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. For instance, we've identified 3 warning signs for SJW Group (1 is potentially serious) that you should be aware of.
Of course SJW Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
