While ePlus inc. (NASDAQ:PLUS) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. On the other hand the share price is higher than it was three years ago. In that time, it is up 19%, which isn't bad, but not amazing either.
In light of the stock dropping 7.3% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
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 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.
ePlus was able to grow its EPS at 18% per year over three years, sending the share price higher. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that ePlus has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
While it's never nice to take a loss, ePlus shareholders can take comfort that their trailing twelve month loss of 10% wasn't as bad as the market loss of around 15%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 3% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand ePlus better, we need to consider many other factors. For instance, we've identified 2 warning signs for ePlus (1 is potentially serious) that you should be aware of.
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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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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