CarMax (NYSE:KMX) earnings and shareholder returns have been trending downwards for the last three years, but the stock swells 13% this past week

CarMax, Inc. (NYSE:KMX) shareholders should be happy to see the share price up 18% in the last month. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 40% in the last three years, significantly under-performing the market.

While the last three years has been tough for CarMax shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

Check out our latest analysis for CarMax

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

CarMax saw its EPS decline at a compound rate of 28% per year, over the last three years. In comparison the 16% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

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

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

A Different Perspective

CarMax shareholders have received returns of 34% over twelve months, which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 2%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for CarMax. 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. For instance, we've identified 1 warning sign for CarMax that you should be aware of.

Of course CarMax may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.