We believe investing is smart because history shows that stock markets go higher in the long term. But not every stock you buy will perform as well as the overall market. Unfortunately for shareholders, while the Daktronics, Inc. (NASDAQ:DAKT) share price is up 53% in the last year, that falls short of the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 29% in three years.
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…’ 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).
During the last year Daktronics grew its earnings per share, moving from a loss to a profit.
When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).
Daktronics’ revenue actually dropped 20% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It’s probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Daktronics will earn in the future (free profit forecasts).
A Different Perspective
Daktronics shareholders are up 53% for the year. But that was short of the market average. But at least that’s still a gain! Over five years the TSR has been a reduction of 1.9% per year, over five years. It could well be that the business is stabilizing. It’s always interesting to track share price performance over the longer term. But to understand Daktronics better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Daktronics 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.
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This article by Simply Wall St is general in nature. 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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