Vista Outdoor Inc. (NYSE:VSTO) shareholders might be concerned after seeing the share price drop 11% in the last week. But over the last year the share price has taken off like one of Elon Musk's rockets. In that time, shareholders have had the pleasure of a 443% boost to the share price. So the recent fall isn't enough to negate the good performance. Of course, winners often do keep winning, so there may be more gains to come (if the business fundamentals stack up).
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.
Vista Outdoor went from making a loss to reporting a profit, in the last year.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We think that the revenue growth of 11% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
We're pleased to report that Vista Outdoor shareholders have received a total shareholder return of 443% over one year. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Case in point: We've spotted 5 warning signs for Vista Outdoor you should be aware of, and 1 of them can't be ignored.
Vista Outdoor is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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What are the risks and opportunities for Vista Outdoor?
Trading at 57.2% below our estimate of its fair value
Earnings are forecast to decline by an average of 8% per year for the next 3 years
Has a high level of debt
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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