If You Had Bought AutoNation (NYSE:AN) Stock A Year Ago, You Could Pocket A 20% Gain Today
If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the AutoNation, Inc. (NYSE:AN) share price is up 20% in the last year, clearly besting the market return of around -0.3% (not including dividends). That's a solid performance by our standards! The longer term returns have not been as good, with the stock price only 2.2% higher than it was three years ago.
Check out our latest analysis for AutoNation
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. 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 year, AutoNation actually saw its earnings per share drop 6.8%.
This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
Unfortunately AutoNation's fell 3.1% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling AutoNation stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
We're pleased to report that AutoNation shareholders have received a total shareholder return of 20% over one year. That certainly beats the loss of about 1.5% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.
AutoNation is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
