Shareholders in MP Materials (NYSE:MP) are in the red if they invested a year ago




  • In Business
  • 2022-11-27 12:21:31Z
  • By Simply Wall St.
 

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the MP Materials Corp. (NYSE:MP) share price is down 22% in the last year. That falls noticeably short of the market decline of around 17%. MP Materials hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for MP Materials

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Even though the MP Materials share price is down over the year, its EPS actually improved. 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. But we might find some different metrics explain the share price movements better.

MP Materials 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 graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We doubt MP Materials shareholders are happy with the loss of 22% over twelve months. That falls short of the market, which lost 17%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 8.3%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Take risks, for example - MP Materials has 1 warning sign we think 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.

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

COMMENTS

More Related News

Those who invested in Galliford Try Holdings (LON:GFRD) five years ago are up 131%
Those who invested in Galliford Try Holdings (LON:GFRD) five years ago are up 131%

Ideally, your overall portfolio should beat the market average. A talented investor can beat the market with a...

Is It Too Late To Consider Buying Christie Group plc (LON:CTG)?
Is It Too Late To Consider Buying Christie Group plc (LON:CTG)?

Christie Group plc ( LON:CTG ), is not the largest company out there, but it saw significant share price movement...

Investing in Swisscom (VTX:SCMN) five years ago would have delivered you a 38% gain
Investing in Swisscom (VTX:SCMN) five years ago would have delivered you a 38% gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore...

Investing in Homeritz Corporation Berhad (KLSE:HOMERIZ) five years ago would have delivered you a 5.9% gain
Investing in Homeritz Corporation Berhad (KLSE:HOMERIZ) five years ago would have delivered you a 5.9% gain

It's possible to achieve returns close to the market-weighted average return by buying an index fund. But even in a...

Pulling back 3.3% this week, CNA Financial
Pulling back 3.3% this week, CNA Financial's NYSE:CNA) five-year decline in earnings may be coming into investors focus

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business