Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. For example, the Simulations Plus, Inc. (NASDAQ:SLP) share price is down 17% in the last year. That falls noticeably short of the market return of around 38%. However, the longer term returns haven't been so bad, with the stock down 12% in the last three years. The falls have accelerated recently, with the share price down 16% in the last three months.

While the stock has risen 9.7% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Unhappily, Simulations Plus had to report a 6.3% decline in EPS over the last year. This reduction in EPS is not as bad as the 17% share price fall. This suggests the EPS fall has made some shareholders more nervous about the business. Having said that, the market is still optimistic, given the P/E ratio of 69.06.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

While the broader market gained around 38% in the last year, Simulations Plus shareholders lost 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Simulations Plus better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Simulations Plus you should know about.

Of course Simulations Plus may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.