Did Pennant Group's (NASDAQ:PNTG) Share Price Deserve to Gain 85%?

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the The Pennant Group, Inc. (NASDAQ:PNTG) share price is up 85% in the last year, clearly besting the market return of around 25% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! We'll need to follow Pennant Group for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

Check out our latest analysis for Pennant Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Pennant Group actually saw its earnings per share drop 21%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

However the year on year revenue growth of 15% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

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

A Different Perspective

Pennant Group shareholders should be happy with the total gain of 85% over the last twelve months. And the share price momentum remains respectable, with a gain of 24% in the last three months. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It's always interesting to track share price performance over the longer term. But to understand Pennant Group better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Pennant Group .

Of course Pennant Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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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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