Strong week for AdaptHealth (NASDAQ:AHCO) shareholders doesn't alleviate pain of one-year loss

By
Simply Wall St
Published
March 22, 2022
NasdaqCM:AHCO
Source: Shutterstock

This week we saw the AdaptHealth Corp. (NASDAQ:AHCO) share price climb by 13%. But that doesn't change the fact that the returns over the last year have been disappointing. During that time the share price has sank like a stone, descending 51%. It's not that amazing to see a bounce after a drop like that. It may be that the fall was an overreaction.

While the stock has risen 13% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for AdaptHealth

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. 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 last year AdaptHealth grew its earnings per share, moving from a loss to a profit.

We're surprised that the share price is lower given that improvement. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.

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

earnings-per-share-growth
NasdaqCM:AHCO Earnings Per Share Growth March 22nd 2022

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Dive deeper into the earnings by checking this interactive graph of AdaptHealth's earnings, revenue and cash flow.

A Different Perspective

While AdaptHealth shareholders are down 51% for the year, the market itself is up 5.2%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 21%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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 3 warning signs with AdaptHealth (at least 1 which is concerning) , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. You probably do 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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