Match Group, Inc. (NASDAQ:MTCH) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But over the last three years the stock has shone bright like a diamond. Over that time, we’ve been excited to watch the share price climb an impressive 303%. As long term investors the recent fall doesn’t detract all that much from the longer term story. The share price action could signify that the business itself is dramatically improved, in that time.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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).
Match Group was able to grow its EPS at 39% per year over three years, sending the share price higher. This EPS growth is lower than the 59% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Match Group has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Match Group’s total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Match Group hasn’t been paying dividends, but its TSR of 324% exceeds its share price return of 303%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Pleasingly, Match Group’s total shareholder return last year was 23%. The TSR has been even better over three years, coming in at 62% per year. It’s always interesting to track share price performance over the longer term. But to understand Match Group better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we’ve spotted with Match Group .
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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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