PayPal Holdings, Inc. (NASDAQ:PYPL) shareholders should be happy to see the share price up 12% in the last quarter. But that is small recompense for the exasperating returns over three years. Regrettably, the share price slid 54% in that period. Some might say the recent bounce is to be expected after such a bad drop. 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.
View 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 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.
Although the share price is down over three years, PayPal Holdings actually managed to grow EPS by 1.7% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It looks to us like the market was probably too optimistic around growth three years ago. But it’s possible a look at other metrics will be enlightening.
Revenue is actually up 8.1% 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.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
PayPal Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
It’s good to see that PayPal Holdings has rewarded shareholders with a total shareholder return of 41% in the last twelve months. 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. 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.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
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.
