If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Forestar Group Inc. (NYSE:FOR) has fallen short of that second goal, with a share price rise of 84% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 43% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years of share price growth, Forestar Group moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Forestar Group has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Forestar Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Forestar Group's TSR for the year was broadly in line with the market average, at 43%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 13% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. Case in point: We've spotted 3 warning signs for Forestar Group you should be aware of, and 2 of them are significant.
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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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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