3P Learning Limited (ASX:3PL) shareholders should be happy to see the share price up 23% in the last month. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 57% in that time. Some might say the recent bounce is to be expected after such a bad drop. But it could be that the fall was overdone.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, 3P Learning moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
In contrast to the share price, revenue has actually increased by 4.7% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that 3P Learning has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for 3P Learning in this interactive graph of future profit estimates.
A Different Perspective
Although it hurts that 3P Learning returned a loss of 6.1% in the last twelve months, the broader market was actually worse, returning a loss of 8.4%. Of far more concern is the 9.4% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. It's always interesting to track share price performance over the longer term. But to understand 3P Learning better, we need to consider many other factors. For example, we've discovered 1 warning sign for 3P Learning that you should be aware of before investing here.
We will like 3P Learning 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 AU exchanges.
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. 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.
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