The total return for Legacy Housing (NASDAQ:LEGH) investors has risen faster than earnings growth over the last five years

Legacy Housing Corporation (NASDAQ:LEGH) shareholders might be concerned after seeing the share price drop 25% in the last quarter. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 38%, less than the market return of 90%.

Since the long term performance has been good but there's been a recent pullback of 9.8%, let's check if the fundamentals match the share price.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Legacy Housing managed to grow its earnings per share at 7.3% a year. So the EPS growth rate is rather close to the annualized share price gain of 7% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Legacy Housing had a tough year, with a total loss of 24%, against a market gain of about 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before deciding if you like the current share price, check how Legacy Housing scores on these 3 valuation metrics.

We will like Legacy Housing better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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