Asbury Automotive Group (NYSE:ABG) sheds 6.2% this week, as yearly returns fall more in line with earnings growth

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Asbury Automotive Group, Inc. (NYSE:ABG) shareholders would be well aware of this, since the stock is up 126% in five years. Unfortunately, though, the stock has dropped 6.2% over a week. However, this might be related to the overall market decline of 0.7% in a week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Asbury Automotive Group

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 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.

Over half a decade, Asbury Automotive Group managed to grow its earnings per share at 17% a year. So the EPS growth rate is rather close to the annualized share price gain of 18% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Asbury Automotive Group's key metrics by checking this interactive graph of Asbury Automotive Group's earnings, revenue and cash flow.

A Different Perspective

Asbury Automotive Group shareholders are up 7.5% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 18% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Asbury Automotive Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Asbury Automotive Group (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

We will like Asbury Automotive Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.