KAR Auction Services (NYSE:KAR) investors are sitting on a loss of 5.7% if they invested three years ago
KAR Auction Services, Inc. (NYSE:KAR) shareholders should be happy to see the share price up 14% in the last quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 65% in the last three years, falling well short of the market return.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for KAR Auction Services
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 five years of share price growth, KAR Auction Services moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
Arguably the revenue decline of 6.5% per year has people thinking KAR Auction Services is shrinking. And that's not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that KAR Auction Services has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on KAR Auction Services
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between KAR Auction Services' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that KAR Auction Services' TSR, which was a 5.7% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
We're pleased to report that KAR Auction Services shareholders have received a total shareholder return of 19% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand KAR Auction Services better, we need to consider many other factors. Take risks, for example - KAR Auction Services has 2 warning signs (and 1 which is significant) we think you should know about.
We will like KAR Auction Services better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
