It hasn't been the best quarter for Construction Partners, Inc. (NASDAQ:ROAD) shareholders, since the share price has fallen 26% in that time. But that doesn't change the fact that the returns over the last three years have been respectable. In that time the stock gained 47%, besting the market return of 44%.
While the stock has fallen 24% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
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 three years of share price growth, Construction Partners actually saw its earnings per share (EPS) drop 30% per year.
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 could be that the revenue growth of 10% per year is viewed as evidence that Construction Partners is growing. If the company is being managed for the long term good, today's shareholders might be right to hold on.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Construction Partners stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
The last twelve months weren't great for Construction Partners shares, which performed worse than the market, costing holders 36%. The market shed around 9.8%, no doubt weighing on the stock price. Fortunately the longer term story is brighter, with total returns averaging about 14% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Construction Partners (1 can't be ignored!) that you should be aware of before investing here.
Of course Construction Partners 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.
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.