Cavco Industries, Inc. (NASDAQ:CVCO) shareholders might be concerned after seeing the share price drop 16% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 139% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Of course, that doesn't necessarily mean it's cheap now.
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).
During five years of share price growth, Cavco Industries achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is higher than the 19% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Cavco Industries's key metrics by checking this interactive graph of Cavco Industries's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Cavco Industries shareholders have received a total shareholder return of 14% over the last year. Having said that, the five-year TSR of 19% a year, is even better. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with Cavco Industries (including 1 which is is significant) .
Of course Cavco Industries 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.
This article by Simply Wall St is general in nature. 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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