When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term eDreams ODIGEO S.A. (BME:EDR) shareholders would be well aware of this, since the stock is up 155% in five years. It's down 3.7% in the last seven days.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years of share price growth, eDreams ODIGEO moved from a loss to profitability. 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 eDreams ODIGEO share price is up 38% in the last three years. In the same period, EPS is up 23% per year. This EPS growth is higher than the 11% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 11.50.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that eDreams ODIGEO has improved its bottom line lately, but is it going to grow revenue? Check if analysts think eDreams ODIGEO will grow revenue in the future.
A Different Perspective
It's nice to see that eDreams ODIGEO shareholders have received a total shareholder return of 28% over the last year. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before forming an opinion on eDreams ODIGEO you might want to consider these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ES exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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