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Asbury Automotive Group, Inc. (NYSE:ABG) shareholders have seen the share price descend 17% over the month. 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 252% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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. 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 18% a year. This EPS growth is slower than the share price growth of 29% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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
While the broader market lost about 2.0% in the twelve months, Asbury Automotive Group shareholders did even worse, losing 5.1%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 29% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Take risks, for example - Asbury Automotive Group has 4 warning signs (and 1 which is concerning) we think you should know about.