Asbury Automotive Group's (NYSE:ABG) 18% CAGR outpaced the company's earnings growth over the same five-year period

Explore Asbury Automotive Group's Fair Values from the Community and select yours

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. Long term Asbury Automotive Group, Inc. (NYSE:ABG) shareholders would be well aware of this, since the stock is up 126% in five years. And in the last week the share price has popped 6.0%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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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.

During five years of share price growth, Asbury Automotive Group achieved compound earnings per share (EPS) growth of 27% per year. This EPS growth is higher than the 18% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.85.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Asbury Automotive Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Asbury Automotive Group will grow revenue in the future.

A Different Perspective

Asbury Automotive Group shareholders are up 8.9% for the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 18% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Case in point: We've spotted 1 warning sign for Asbury Automotive Group you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.