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Is TravelCenters of America's (NASDAQ:TA) Share Price Gain Of 180% Well Earned?

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Simply Wall St
·3 min read
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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right stock, you can make a lot more than 100%. For example, the TravelCenters of America Inc. (NASDAQ:TA) share price has soared 180% in the last year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 77% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Looking back further, the stock price is 39% higher than it was three years ago.

See our latest analysis for TravelCenters of America

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. 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 the last year TravelCenters of America grew its earnings per share, moving from a loss to a profit.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

TravelCenters of America's revenue actually dropped 17% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think TravelCenters of America will earn in the future (free profit forecasts).

A Different Perspective

We're pleased to report that TravelCenters of America shareholders have received a total shareholder return of 180% over one year. That certainly beats the loss of about 7% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for TravelCenters of America (2 are a bit unpleasant!) that you should be aware of before investing here.

TravelCenters of America 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 US 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.