Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Funding Circle Holdings plc (LON:FCH) have suffered share price declines over the last year. The share price has slid 63% in that time. We note that it has not been easy for shareholders over three years, either; the share price is down 56% in that time. The falls have accelerated recently, with the share price down 23% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Funding Circle Holdings managed to increase earnings per share from a loss to a profit, over the last 12 months.
The result looks like a strong improvement to us, so we're surprised the market has sold down the shares. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Funding Circle Holdings' earnings, revenue and cash flow.
A Different Perspective
Funding Circle Holdings shareholders are down 63% for the year, falling short of the market return. The market shed around 6.0%, no doubt weighing on the stock price. Shareholders have lost 16% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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 - Funding Circle Holdings has 1 warning sign we think you should be aware of.
Funding Circle Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.