Yahoo Finance Baidu's (NASDAQ:BIDU) earnings trajectory could turn positive as the stock climbs 6.8% this past week
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Baidu, Inc. (NASDAQ:BIDU) shareholders have had that experience, with the share price dropping 38% in three years, versus a market return of about 17%. But it's up 6.8% in the last week.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
See our latest analysis for Baidu
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Baidu saw its EPS decline at a compound rate of 5.2% per year, over the last three years. This reduction in EPS is slower than the 15% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Baidu has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
While the broader market gained around 26% in the last year, Baidu shareholders lost 7.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before forming an opinion on Baidu you might want to consider these 3 valuation metrics.
We will like Baidu better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
