Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the Patterson-UTI Energy, Inc. (NASDAQ:PTEN) share price slid 42% over twelve months. That's well below the market return of 41%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 13% in three years. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.

If the past week is anything to go by, investor sentiment for Patterson-UTI Energy isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Patterson-UTI Energy had to report a 80% decline in EPS over the last year. The share price fall of 42% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Patterson-UTI Energy has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Patterson-UTI Energy's financial health with this free report on its balance sheet.

A Different Perspective

Investors in Patterson-UTI Energy had a tough year, with a total loss of 40% (including dividends), against a market gain of about 41%. 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 0.8% 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. 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. Case in point: We've spotted 4 warning signs for Patterson-UTI Energy you should be aware of, and 1 of them is significant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.