In This Article:
Criteo S.A. (NASDAQ:CRTO) shareholders might be concerned after seeing the share price drop 22% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 210% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Ultimately business performance will determine whether the stock price continues the positive long term trend.
While the stock has fallen 7.0% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Criteo achieved compound earnings per share (EPS) growth of 7.8% per year. This EPS growth is slower than the share price growth of 25% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Criteo has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
Criteo shareholders are down 14% for the year, but the market itself is up 6.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 25%, 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. It's always interesting to track share price performance over the longer term. But to understand Criteo better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Criteo you should know about.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.