Is Navistar International’s (NYSE:NAV) 146% Share Price Increase Well Justified?

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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Navistar International Corporation (NYSE:NAV) share price has flown 146% in the last three years. That sort of return is as solid as granite. Better yet, the share price has risen 5.1% in the last week. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

See our latest analysis for Navistar International

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

During three years of share price growth, Navistar International moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

NYSE:NAV Past and Future Earnings, June 6th 2019
NYSE:NAV Past and Future Earnings, June 6th 2019

It is of course excellent to see how Navistar International has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Navistar International’s financial health with this free report on its balance sheet.

A Different Perspective

While the broader market gained around 1.3% in the last year, Navistar International shareholders lost 13%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you would like to research Navistar International in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.