In This Article:
Adyen N.V. (AMS:ADYEN) shareholders might be concerned after seeing the share price drop 16% in the last month. But in stark contrast, the returns over the last half decade have impressed. We think most investors would be happy with the 101% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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.
During five years of share price growth, Adyen achieved compound earnings per share (EPS) growth of 30% per year. The EPS growth is more impressive than the yearly share price gain of 15% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 52.97, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Adyen's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Adyen has rewarded shareholders with a total shareholder return of 3.4% in the last twelve months. However, the TSR over five years, coming in at 15% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Adyen better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Adyen you should know about.