The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Intel Corporation (NASDAQ:INTC) have tasted that bitter downside in the last year, as the share price dropped 45%. That's disappointing when you consider the market declined 16%. We note that it has not been easy for shareholders over three years, either; the share price is down 42% 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.
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. 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 Intel share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.
We don't see any weakness in the Intel's dividend so the steady payout can't really explain the share price drop. In fact, it seems more likely that the revenue fall of 5.5% in the last year is the worry. So it seems likely that the weak revenue is making the market more cautious about the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We regret to report that Intel shareholders are down 43% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2% over the last half decade. 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. It's always interesting to track share price performance over the longer term. But to understand Intel better, we need to consider many other factors. For example, we've discovered 2 warning signs for Intel (1 is concerning!) that you should be aware of before investing here.
Intel 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 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
