Stock Analysis

Encore Capital Group (NASDAQ:ECPG) Share Prices Have Dropped 25% In The Last Three Years

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NasdaqGS:ECPG
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For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Encore Capital Group, Inc. (NASDAQ:ECPG) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 45%. Furthermore, it's down 25% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.

View our latest analysis for Encore Capital Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the unfortunate three years of share price decline, Encore Capital Group actually saw its earnings per share (EPS) improve by 25% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.

It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.

Revenue is actually up 8.4% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Encore Capital Group more closely, as sometimes stocks fall unfairly. This could present an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NasdaqGS:ECPG Earnings and Revenue Growth November 19th 2020

We know that Encore Capital Group has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Encore Capital Group in this interactive graph of future profit estimates.

A Different Perspective

While the broader market gained around 22% in the last year, Encore Capital Group shareholders lost 5.2%. 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 0.8%, 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. It's always interesting to track share price performance over the longer term. But to understand Encore Capital Group better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Encore Capital Group (including 1 which is doesn't sit too well with us) .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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