You can invest in an index fund if you want to make sure your returns approximately match the overall market. By comparison, an individual stock is unlikely to match market returns - and could well fall short. That's what happened in the case of PPG Industries, Inc. (NYSE:PPG): its share price dropped 22% while the market declined 19%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 1.0% in three years. Even worse, it's down 10% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 8.0% in the same time period.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Unhappily, PPG Industries had to report a 30% decline in EPS over the last year. This fall in the EPS is significantly worse than the 22% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on PPG Industries' earnings, revenue and cash flow.
A Different Perspective
PPG Industries shareholders are down 21% over twelve months (even including dividends), which isn't far from the market return of -19%. Longer term investors wouldn't be so upset, since they would have made 1.9%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It's always interesting to track share price performance over the longer term. But to understand PPG Industries better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with PPG Industries (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
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