PRA Group (NASDAQ:PRAA) shareholders have earned a 9.4% CAGR over the last three years
PRA Group, Inc. (NASDAQ:PRAA) shareholders might be concerned after seeing the share price drop 20% in the last quarter. But that doesn't change the fact that the returns over the last three years have been respectable. In fact the stock is up 31%, which is better than the market return of 27%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for PRA Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, PRA Group achieved compound earnings per share growth of 46% per year. This EPS growth is higher than the 9% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.69.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that PRA Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on PRA Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
While it's certainly disappointing to see that PRA Group shares lost 10% throughout the year, that wasn't as bad as the market loss of 21%. Given the total loss of 0.7% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It's always interesting to track share price performance over the longer term. But to understand PRA Group better, we need to consider many other factors. Even so, be aware that PRA Group is showing 3 warning signs in our investment analysis , and 2 of those are significant...
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.
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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.
