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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. To wit, the Enova International, Inc. (NYSE:ENVA) share price has flown 230% in the last three years. How nice for those who held the stock! It’s down 3.9% in the last seven days.
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).
Enova International was able to grow its EPS at 37% per year over three years, sending the share price higher. This EPS growth is lower than the 49% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Enova International has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Enova International’s financial health with this free report on its balance sheet.
A Different Perspective
Enova International shareholders are down 39% for the year, but the broader market is up 7.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 49% per year over three years. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. Before deciding if you like the current share price, check how Enova International scores on these 3 valuation metrics.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.
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 email@example.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.