Conn’s, Inc. (NASDAQ:CONN) shareholders should be happy to see the share price up 23% in the last month. But that doesn’t change the fact that the returns over the last year have been disappointing. Specifically, the stock price slipped by 51% in that time. The share price recovery is not so impressive when you consider the fall. Arguably, the fall was overdone.
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.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
Unfortunately Conn’s reported an EPS drop of 27% for the last year. This reduction in EPS is not as bad as the 51% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. The P/E ratio of 3.94 also points to the negative market sentiment.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Conn’s’ key metrics by checking this interactive graph of Conn’s’s earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 13% in the twelve months, Conn’s shareholders did even worse, losing 51%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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. Even so, be aware that Conn’s is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant…
We will like Conn’s better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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