Shareholders Are Raving About How The America's Car-Mart (NASDAQ:CRMT) Share Price Increased 423%

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held America's Car-Mart, Inc. (NASDAQ:CRMT) shares for the last five years, while they gained 423%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 24% gain in the last three months. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

See our latest analysis for America's Car-Mart

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 five years of share price growth, America's Car-Mart achieved compound earnings per share (EPS) growth of 42% per year. This EPS growth is reasonably close to the 39% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. In fact, the share price seems to largely reflect the EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

America's Car-Mart provided a TSR of 21% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 39% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for America's Car-Mart you should be aware of.

America's Car-Mart 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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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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