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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term AdaptHealth Corp. (NASDAQ:AHCO) shareholders have had that experience, with the share price dropping 49% in three years, versus a market return of about 22%. The falls have accelerated recently, with the share price down 23% in the last three months. But this could be related to the weak market, which is down 11% in the same period.
After losing 11% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
AdaptHealth became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
Revenue is actually up 8.1% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating AdaptHealth further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that AdaptHealth has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for AdaptHealth in this interactive graph of future profit estimates.
A Different Perspective
AdaptHealth shareholders are down 17% for the year, but the market itself is up 7.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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 - AdaptHealth has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.