Shareholders in PRA Group (NASDAQ:PRAA) are in the red if they invested five years ago
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in PRA Group, Inc. (NASDAQ:PRAA), since the last five years saw the share price fall 46%. We also note that the stock has performed poorly over the last year, with the share price down 39%. Shareholders have had an even rougher run lately, with the share price down 41% in the last 90 days.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Looking back five years, both PRA Group's share price and EPS declined; the latter at a rate of 31% per year. This fall in the EPS is worse than the 11% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. With a P/E ratio of 48.26, it's fair to say the market sees a brighter future for the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of PRA Group's earnings, revenue and cash flow.
A Different Perspective
Investors in PRA Group had a tough year, with a total loss of 39%, against a market gain of about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 3 warning signs for PRA Group you should be aware of, and 1 of them doesn't sit too well with us.
PRA Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
