Asbury Automotive Group (NYSE:ABG) stock performs better than its underlying earnings growth over last five years
Asbury Automotive Group's stock price has risen 70% over five years, outperforming its earnings growth of 22% annually. Despite a 9.7% drop in the last year, long-term shareholders gained 11% annually. The cautious market sentiment is reflected in a low P/E ratio of 8.13. Investors should consider fundamental metrics and risks before investing.
If you want to compound wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Asbury Automotive Group, Inc. (NYSE:ABG) share price is 70% higher than it was five years ago, which is more than the market average. Zooming in, the stock is actually down 9.7% in the last year.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Over half a decade, Asbury Automotive Group managed to grow its earnings per share at 22% a year. This EPS growth is higher than the 11% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.13.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Asbury Automotive Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
Investors in Asbury Automotive Group had a tough year, with a total loss of 9.7%, against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for Asbury Automotive Group you should know about.
Of course Asbury Automotive Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
