Stock Analysis

Did Lee Enterprises' (NYSE:LEE) Share Price Deserve to Gain 74%?

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NasdaqGS:LEE
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If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Lee Enterprises, Incorporated (NYSE:LEE) share price is up 74% in the last five years, that's less than the market return. However, more recent buyers should be happy with the increase of 32% over the last year.

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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.

Lee Enterprises' earnings per share are down 22% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It is not great to see that revenue has dropped by 2.0% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

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

earnings-and-revenue-growth
NYSE:LEE Earnings and Revenue Growth February 22nd 2021

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Lee Enterprises' earnings, revenue and cash flow.

A Different Perspective

Lee Enterprises' TSR for the year was broadly in line with the market average, at 32%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 12% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Lee Enterprises better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 6 warning signs for Lee Enterprises (of which 3 can't be ignored!) you should know about.

Lee Enterprises is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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What are the risks and opportunities for Lee Enterprises?

Lee Enterprises, Incorporated provides local news and information, and advertising services in the United States.

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Rewards

  • Earnings are forecast to grow 96.63% per year

Risks

  • Interest payments are not well covered by earnings

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