The nature of investing is that you win some, and you lose some. And unfortunately for Reece Limited (ASX:REH) shareholders, the stock is a lot lower today than it was a year ago. In that relatively short period, the share price has plunged 65%. At least the damage isn't so bad if you look at the last three years, since the stock is down 27% in that time. Shareholders have had an even rougher run lately, with the share price down 38% in the last 90 days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

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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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unhappily, Reece had to report a 24% decline in EPS over the last year. This reduction in EPS is not as bad as the 65% share price fall. So it seems the market was too confident about the business, a year ago.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).ASX:REH Earnings Per Share Growth September 22nd 2025

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Reece's earnings, revenue and cash flow.

A Different Perspective

Reece shareholders are down 64% for the year (even including dividends), but the market itself is up 11%. 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 3% 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. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this freelist of undervalued small cap companies that insiders are buying.

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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.

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