Unless you borrow money to invest, the potential losses are limited. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Eagle Materials Inc. (NYSE:EXP) share price had more than doubled in just one year – up 152%. Also pleasing for shareholders was the 32% gain in the last three months. Having said that, the longer term returns aren’t so impressive, with stock gaining just 28% in three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 last year Eagle Materials saw its earnings per share (EPS) increase strongly. This remarkable growth rate may not be sustainable, but it is still impressive. We are not surprised the share price is up. Strong growth like this can be evidence of a fundamental inflection point in the business, making it a good time to investigate the stock more closely.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Eagle Materials has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
We’re pleased to report that Eagle Materials shareholders have received a total shareholder return of 152% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It’s always interesting to track share price performance over the longer term. But to understand Eagle Materials better, we need to consider many other factors. Even so, be aware that Eagle Materials is showing 4 warning signs in our investment analysis , you should know about…
Of course Eagle Materials 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 US exchanges.
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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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