The Marlowe (LON:MRL) Share Price Is Up 51% And Shareholders Are Holding On

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Marlowe plc (LON:MRL), which is up 51%, over three years, soundly beating the market decline of 3.4% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 16%.

View our latest analysis for Marlowe

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years of share price growth, Marlowe actually saw its earnings per share (EPS) drop 32% per year. In this instance, recent extraordinary items impacted the earnings.

Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It may well be that Marlowe revenue growth rate of 35% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

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

If you are thinking of buying or selling Marlowe stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Marlowe shareholders have gained 16% (in total) over the last year. That gain actually surpasses the 15% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Marlowe better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Marlowe you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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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