Even though Atlanticus Holdings (NASDAQ:ATLC) has lost US$72m market cap in last 7 days, shareholders are still up 996% over 5 years
Atlanticus Holdings Corporation (NASDAQ:ATLC) shareholders might be rather concerned because the share price has dropped 38% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 996%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 64% drop, in the last year. Anyone who held for that rewarding ride would probably be keen to talk about it.
While the stock has fallen 19% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
See our latest analysis for Atlanticus Holdings
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last half decade, Atlanticus Holdings became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Atlanticus Holdings share price is up 299% in the last three years. In the same period, EPS is up 64% per year. This EPS growth is reasonably close to the 59% average annual increase in the share price (over three years, again). So one might argue that investor sentiment towards the stock hss not changed much over time. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Atlanticus Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
While the broader market lost about 13% in the twelve months, Atlanticus Holdings shareholders did even worse, losing 64%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 61%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Atlanticus Holdings has 3 warning signs (and 2 which are potentially serious) we think you should know about.
Atlanticus Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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