- Oops!Something went wrong.Please try again later.
While it may not be enough for some shareholders, we think it is good to see the Yiren Digital Ltd. (NYSE:YRD) share price up 23% in a single quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 89%. So it sure is nice to see a bit of an improvement. Of course the real question is whether the business can sustain a turnaround.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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 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 the three years that the share price fell, Yiren Digital's earnings per share (EPS) dropped by 49% each year. This change in EPS is reasonably close to the 52% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. In this case, it seems that the EPS is guiding the share price.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Yiren Digital's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Yiren Digital shareholders are down 20% for the year, but the broader market is up 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, the longer term story isn't pretty, with investment losses running at 24% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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 Yiren Digital , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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 email@example.com.