Victoria’s Secret & Co. share prices slid 32% over twelve months. That contrasts poorly with the market decline of 11%.
The investors are still in the red over the last year, so let’s see if the underlying business has been responsible for the decline.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Unhappily, Victoria’s Secret had to report a 42% decline in EPS over the last year. This fall in the EPS is significantly worse than the 32% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult.
