Yahoo Finance As PayPal Holdings (NASDAQ:PYPL) grows 4.4% this past week, investors may now be noticing the company's three-year earnings growth
It's not possible to invest over long periods without making some bad investments. But you want to avoid the really big losses like the plague. So spare a thought for the long term shareholders of PayPal Holdings, Inc. (NASDAQ:PYPL); the share price is down a whopping 76% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
See our latest analysis for PayPal Holdings
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 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).
During the unfortunate three years of share price decline, PayPal Holdings actually saw its earnings per share (EPS) improve by 1.5% per year. 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. Looking to other metrics might better explain the share price change.
We note that, in three years, revenue has actually grown at a 8.4% annual rate, so that doesn't seem to be a reason to sell shares. 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.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
PayPal Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think PayPal Holdings will earn in the future (free analyst consensus estimates)
A Different Perspective
PayPal Holdings shareholders gained a total return of 5.2% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 7% endured over half a decade. So this might be a sign the business has turned its fortunes around. If you would like to research PayPal Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
