Marlowe plc (LON:MRL) shareholders might be concerned after seeing the share price drop 19% in the last quarter. But that does not change the realty that the stock’s performance has been terrific, over five years. In that time, the share price has soared some 545% higher! So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
It really delights us to see such great share price performance for investors.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 five years of share price growth, Marlowe actually saw its EPS drop 31% per year. The impact of extraordinary items on earnings, in the last year, partially explain the diversion. Essentially, it doesn’t seem likely that investors are focused on EPS. Because earnings per share don’t seem to match up with the share price, we’ll take a look at other metrics instead.
In contrast revenue growth of 62% per year is probably viewed as evidence that Marlowe is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Marlowe
A Different Perspective
Marlowe shareholders are down 9.5% for the year, but the market itself is up 1.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 45%, 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. You could get a better understanding of Marlowe’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Of course Marlowe may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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 firstname.lastname@example.org. 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.