One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Adient plc (NYSE:ADNT), which is up 55%, over three years, soundly beating the market return of 23% (not including dividends).
Although Adient has shed US$141m from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.
View our latest analysis for Adient
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. 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).
Adient became profitable within the last three years. That would generally be considered a positive, so we’d expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Adient has grown profits over the years, but the future is more important for shareholders. This free interactive report on Adient’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
We regret to report that Adient shareholders are down 22% for the year. Unfortunately, that’s worse than the broader market decline of 19%. 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 9% 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 Adient better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Adient .
But note: Adient may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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