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Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Adient plc (NYSE:ADNT) share price had more than doubled in just one year - up 153%. In the last week the share price is up 4.8%. In contrast, the longer term returns are negative, since the share price is 11% lower than it was three years ago.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Adient grew its earnings per share (EPS) by 72%. We note, however, that extraordinary items have impacted earnings. The share price gain of 153% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Adient has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Adient will grow revenue in the future.
A Different Perspective
We're pleased to report that Adient rewarded shareholders with a total shareholder return of 153% over the last year. That certainly beats the loss of about 3.2% per year over three years. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Adient that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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. 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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