Yahoo Finance Stanley Black & Decker (NYSE:SWK) sheds US$717m, company earnings and investor returns have been trending downwards for past year
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Stanley Black & Decker, Inc. (NYSE:SWK) share price is down 44% in the last year. That's well below the market decline of 9.8%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 10% in three years. Furthermore, it's down 28% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.
With the stock having lost 3.8% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
View our latest analysis for Stanley Black & Decker
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately Stanley Black & Decker reported an EPS drop of 14% for the last year. This reduction in EPS is not as bad as the 44% share price fall. So it seems the market was too confident about the business, a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Stanley Black & Decker's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Stanley Black & Decker shareholders are down 43% for the year (even including dividends). 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.6% per year over five years. 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. 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. Take risks, for example - Stanley Black & Decker has 5 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
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.