U.S. Markets closed

Does Asbury Automotive Group's (NYSE:ABG) Share Price Gain of 76% Match Its Business Performance?

Simply Wall St

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Asbury Automotive Group, Inc. (NYSE:ABG), which is up 76%, over three years, soundly beating the market return of 34% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 57% in the last year.

View our latest analysis for Asbury Automotive Group

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.

During three years of share price growth, Asbury Automotive Group achieved compound earnings per share growth of 12% per year. This EPS growth is lower than the 21% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

NYSE:ABG Past and Future Earnings, October 10th 2019

We know that Asbury Automotive Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

It's nice to see that Asbury Automotive Group shareholders have received a total shareholder return of 57% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8.3% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

But note: Asbury Automotive Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.