Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term Cushman & Wakefield plc (NYSE:CWK) shareholders, since the share price is down 18% in the last three years, falling well short of the market return of around 34%. The share price has dropped 19% in three months. But this could be related to the weak market, which is down 14% in the same period.
Since Cushman & Wakefield has shed US$129m from its value in the past 7 days, let’s see if the longer term decline has been driven by the business’ economics.
View our latest analysis for Cushman & Wakefield
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.
During five years of share price growth, Cushman & Wakefield moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So it’s worth looking at other metrics to try to understand the share price move.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. There doesn’t seem to be any clear correlation between the fundamental business metrics and the share price. That could mean that the stock was previously overrated, or it could spell opportunity now.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
NYSE:CWK Earnings and Revenue Growth July 10th 2022
It is of course excellent to see how Cushman & Wakefield has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Cushman & Wakefield’s financial health with this free report on its balance sheet.
A Different Perspective
With a loss of 14% in the last year, Cushman & Wakefield’s returns haven’t been too far from the market return of -16%. Over three years shareholders have low 6% per year. This suggests the company might have some problems, not least because the last year saw an even steeper fall. People who buy falling stocks like to quote Baron Rothschild who said to “buy when there’s blood in the streets, even if the blood is your own.” But Baron Rothschild also said to buy quality. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Cushman & Wakefield (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
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.
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.