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Renewable Energy Group, Inc. (NASDAQ:REGI) shareholders might be concerned after seeing the share price drop 20% in the last week. But that doesn't change the fact that the returns over the last half decade have been spectacular. In fact, during that period, the share price climbed 868%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
Anyone who held for that rewarding ride would probably be keen to talk about it.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the last half decade, Renewable Energy Group became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Renewable Energy Group's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Renewable Energy Group shareholders have received a total shareholder return of 194% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 57% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Renewable Energy Group , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies 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 US exchanges.
This article by Simply Wall St is general in nature. 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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