If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Elevate Credit, Inc. (NYSE:ELVT) share price is up 97% in the last year, clearly besting the market return of around 33% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 65% lower than it was three years ago.
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.
During the last year Elevate Credit grew its earnings per share (EPS) by 97%. This EPS growth is remarkably close to the 97% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. We don't think its coincidental that the share price is growing at a similar rate to the earnings per share.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Elevate Credit has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that Elevate Credit shareholders have gained 97% (in total) over the last year. This recent result is much better than the 18% drop suffered by shareholders each year (on average) over the last three. We're generally cautious about putting too much weigh on shorter term data, but the recent improvement is definitely a positive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Elevate Credit you should be aware of, and 2 of them are potentially serious.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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