Elevate Credit (NYSE:ELVT) adds US$9.4m to market cap in the past 7 days, though investors from three years ago are still down 31%

By
Simply Wall St
Published
January 25, 2022
NYSE:ELVT
Source: Shutterstock

Elevate Credit, Inc. (NYSE:ELVT) shareholders should be happy to see the share price up 10% in the last week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 31% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

On a more encouraging note the company has added US$9.4m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Check out our latest analysis for Elevate Credit

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Elevate Credit became profitable within the last five years. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

We think that the revenue decline over three years, at a rate of 24% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:ELVT Earnings and Revenue Growth January 25th 2022

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Elevate Credit shareholders are down 24% for the year, but the broader market is up 5.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 9% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Elevate Credit (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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