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When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the United Airlines Holdings, Inc. (NASDAQ:UAL) share price had more than doubled in just one year - up 156%. On top of that, the share price is up 32% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. And shareholders have also done well over the long term, with an increase of 147% in the last three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for United Airlines Holdings
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 the last year United Airlines Holdings grew its earnings per share (EPS) by 18%. This EPS growth is significantly lower than the 156% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how United Airlines Holdings has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's nice to see that United Airlines Holdings shareholders have received a total shareholder return of 156% over the last year. That's better than the annualised return of 6% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that United Airlines Holdings is showing 2 warning signs in our investment analysis , you should know about...
We will like United Airlines Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.