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Stamps.com Inc. (NASDAQ:STMP) shareholders will doubtless be very grateful to see the share price up 35% in the last month. But that isn’t much consolation for the painful drop we’ve seen in the last year. To wit, the stock has dropped 82% over the last year. So the rise may not be much consolation. The bigger issue is whether the company can sustain the momentum in the long term.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
View our latest analysis for Stamps.com
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unfortunately Stamps.com reported an EPS drop of 20% for the last year. This reduction in EPS is not as bad as the 82% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The less favorable sentiment is reflected in its current P/E ratio of 5.91.
We know that Stamps.com has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Stamps.com’s financial health with this free report on its balance sheet.
A Different Perspective
Stamps.com shareholders are down 82% for the year, but the market itself is up 7.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 5.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.