It is doubtless a positive to see that the PayPal Holdings, Inc. (NASDAQ:PYPL) share price has gained some 40% in the last three months. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 65% in that period. So the improvement may be a real relief to some. After all, could be that the fall was overdone.
So let’s have a look 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 PayPal Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Although the share price is down over three years, PayPal Holdings actually managed to grow EPS by 1.5% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It’s pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it’s possible a look at other metrics will be enlightening.
Revenue is actually up 8.4% over the three years, so the share price drop doesn’t seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching PayPal Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
PayPal Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for PayPal Holdings in this interactive graph of future profit estimates.
It’s nice to see that PayPal Holdings shareholders have received a total shareholder return of 62% over the last year. There’s no doubt those recent returns are much better than the TSR loss of 4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course PayPal Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Leave a Comment