Passive investing in an index fund is a good way to ensure that your own returns roughly match the broader market. But if you buy individual stocks, you can do better or worse than that. For example, the Cricut, Inc. (NASDAQ:CRCT) the stock price is down 46% in the past year. This is significantly lower than the market decline of around 10%. Since Cricut hasn’t been listed for many years, the market is still learning about the company’s performance. Moreover, it fell by 45% in about a quarter. It’s not much fun for the holders.
Going by the past week, investor sentiment for Cricut isn’t positive, so let’s see if there’s a mismatch between the fundamentals and the stock price.
Check out our latest review for Cricut
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that are too reactive and that investors are not always rational. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Unfortunately, Cricut reported an EPS decline of 9.4% for the last year. This reduction in EPS is not as severe as the 46% drop in the share price. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious on the stock.
You can see below how the EPS has evolved over time (find out the exact values by clicking on the image).
We know Cricut has improved its results over the past three years, but what does the future hold? It might be interesting to take a look at our free report on the evolution of its financial situation over time.
A different perspective
We doubt Cricut shareholders are happy with the 46% year-over-year loss. This is below the market, which lost 10%. It’s disappointing, but it’s worth bearing in mind that selling market-wide wouldn’t have helped. The share price decline has continued over the past three months, down 45%, suggesting a lack of enthusiasm from investors. Given the relatively short history of this stock, we would remain fairly cautious until we see strong trading performance. It is always interesting to follow the evolution of the share price over the long term. But to better understand Cricut, we need to consider many other factors. For example, we have identified 3 warning signs for Cricut (1 cannot be ignored) which you should be aware of.
We’ll like Cricut better if we see big insider buys. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.