Tri Pointe Homes (NYSE:TPH) sheds 7.0% this week, as yearly returns fall more in line with earnings growth
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the Tri Pointe Homes, Inc. (NYSE:TPH) share price has soared 102% in the last three years. Most would be happy with that. Also pleasing for shareholders was the 22% gain in the last three months.
Although Tri Pointe Homes has shed US$229m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for Tri Pointe Homes
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...' 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).
Tri Pointe Homes was able to grow its EPS at 48% per year over three years, sending the share price higher. This EPS growth is higher than the 27% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. We'd venture the lowish P/E ratio of 5.43 also reflects the negative sentiment around the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Tri Pointe Homes has grown profits over the years, but the future is more important for shareholders. This free interactive report on Tri Pointe Homes' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Tri Pointe Homes has rewarded shareholders with a total shareholder return of 64% in the last twelve months. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Tri Pointe Homes (at least 1 which is concerning) , and understanding them should be part of your investment process.
We will like Tri Pointe Homes 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 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
