CarMax (NYSE:KMX) stock falls 5.6% in past week as one-year earnings and shareholder returns continue downward trend
Even the best stock pickers will make plenty of bad investments. Anyone who held CarMax, Inc. (NYSE:KMX) over the last year knows what a loser feels like. In that relatively short period, the share price has plunged 52%. Notably, shareholders had a tough run over the longer term, too, with a drop of 31% in the last three years. More recently, the share price has dropped a further 32% in a month. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
After losing 5.6% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for CarMax
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...' 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.
Unfortunately CarMax reported an EPS drop of 30% for the last year. The share price decline of 52% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
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 lost about 21% in the twelve months, CarMax shareholders did even worse, losing 52%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand CarMax better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with CarMax (at least 1 which is significant) , and understanding them should be part of your investment process.
Of course CarMax 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 US 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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