Allegro.eu's (WSE:ALE) earnings growth rate lags the 21% CAGR delivered to shareholders

Low-cost index funds make it easy to achieve average market returns. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the Allegro.eu S.A. (WSE:ALE) share price is up 78% in the last three years, that falls short of the market return. In the last year the stock price gained, albeit only 2.3%.

Although Allegro.eu has shed zł1.3b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Allegro.eu achieved compound earnings per share growth of 22% per year. Notably, the 21% average annual share price gain matches up nicely with the EPS growth rate. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Allegro.eu 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

Allegro.eu shareholders are up 2.3% for the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 8% endured over half a decade. It could well be that the business is stabilizing. Before deciding if you like the current share price, check how Allegro.eu scores on these 3 valuation metrics.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

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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.