Yahoo Finance Earnings are growing at PubMatic (NASDAQ:PUBM) but shareholders still don't like its prospects
The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the PubMatic, Inc. (NASDAQ:PUBM) share price is down 34% in the last year. That's well below the market decline of 18%. Because PubMatic hasn't been listed for many years, the market is still learning about how the business performs. On top of that, the share price is down 6.4% in the last week. But this could be related to the soft market, which is down about 3.6% in the same period.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
See our latest analysis for PubMatic
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the unfortunate twelve months during which the PubMatic share price fell, it actually saw its earnings per share (EPS) improve by 59%. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.
PubMatic managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that PubMatic has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on PubMatic
A Different Perspective
PubMatic shareholders are down 34% for the year, even worse than the market loss of 18%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. With the stock down 5.1% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for PubMatic (1 is potentially serious) 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 US 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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