Yahoo Finance Earnings are growing at Alibaba Group Holding (NYSE:BABA) but shareholders still don't like its prospects
As every investor would know, not every swing hits the sweet spot. But you want to avoid the really big losses like the plague. So take a moment to sympathize with the long term shareholders of Alibaba Group Holding Limited (NYSE:BABA), who have seen the share price tank a massive 71% over a three year period. That would certainly shake our confidence in the decision to own the stock. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
If the past week is anything to go by, investor sentiment for Alibaba Group Holding isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Alibaba Group Holding
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the unfortunate three years of share price decline, Alibaba Group Holding actually saw its earnings per share (EPS) improve by 1.9% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. However, taking a look at other business metrics might shed a bit more light on the share price action.
Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Alibaba Group Holding further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Alibaba Group Holding 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.
A Different Perspective
Alibaba Group Holding provided a TSR of 0.9% over the last twelve months. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 8% per year, over five years. So this might be a sign the business has turned its fortunes around. Before forming an opinion on Alibaba Group Holding you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of growing 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.
