Echo Global Logistics, Inc. (NASDAQ:ECHO) shareholders should be happy to see the share price up 18% in the last quarter. But that is minimal compensation for the share price under-performance over the last year. In fact the stock is down 16% in the last year, well below the market return.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Echo Global Logistics had to report a 11% decline in EPS over the last year. This reduction in EPS is not as bad as the 16% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Echo Global Logistics has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While the broader market gained around 7.7% in the last year, Echo Global Logistics shareholders lost 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.7% over the last half decade. We realise that Buffett 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 businesses. Is Echo Global Logistics cheap compared to other companies? These 3 valuation measures might help you decide.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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