It certainly might concern RCM Technologies, Inc. (NASDAQ:RCMT) shareholders to see the share price down 31% in just 30 days. But that doesn't displace its brilliant performance over three years. The longer term view reveals that the share price is up 457% in that period. Arguably, the recent fall is to be expected after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the share price.
While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During three years of share price growth, RCM Technologies moved from a loss to profitability. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how RCM Technologies has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that RCM Technologies shareholders have received a total shareholder return of 381% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 35% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that RCM Technologies is showing 4 warning signs in our investment analysis , you should know about...
Of course RCM Technologies 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 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.