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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Spirit Airlines, Inc. (NYSE:SAVE) share price is up 33% in the last year, clearly besting than the market return of around 0.8% (not including dividends). So that should have shareholders smiling. Having said that, the longer term returns aren't so impressive, with stock gaining just 16% in three years.
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 the last year, Spirit Airlines actually saw its earnings per share drop 24%. So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
However the year on year revenue growth of 26% would help. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
Spirit Airlines is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Spirit Airlines stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
We're pleased to report that Spirit Airlines shareholders have received a total shareholder return of 33% over one year. There's no doubt those recent returns are much better than the TSR loss of 4.5% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Before spending more time on Spirit Airlines it might be wise to click here to see if insiders have been buying or selling shares.
Of course Spirit Airlines 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.
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 email@example.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.