Advertisement
UK markets close in 6 hours 34 minutes
  • FTSE 100

    7,971.86
    +39.88 (+0.50%)
     
  • FTSE 250

    19,824.09
    +13.43 (+0.07%)
     
  • AIM

    741.60
    -0.51 (-0.07%)
     
  • GBP/EUR

    1.1685
    +0.0016 (+0.14%)
     
  • GBP/USD

    1.2593
    -0.0045 (-0.36%)
     
  • Bitcoin GBP

    56,048.35
    +457.84 (+0.82%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,248.49
    +44.91 (+0.86%)
     
  • DOW

    39,760.08
    +477.75 (+1.22%)
     
  • CRUDE OIL

    81.89
    +0.54 (+0.66%)
     
  • GOLD FUTURES

    2,217.20
    +4.50 (+0.20%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,505.86
    +28.77 (+0.16%)
     
  • CAC 40

    8,250.62
    +45.81 (+0.56%)
     

If You Had Bought ZOO Digital Group (LON:ZOO) Shares Five Years Ago You'd Have Made 900%

While ZOO Digital Group plc (LON:ZOO) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 14% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 900%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.

Anyone who held for that rewarding ride would probably be keen to talk about it.

See our latest analysis for ZOO Digital Group

ADVERTISEMENT

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

During the five years of share price growth, ZOO Digital Group moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

AIM:ZOO Past and Future Earnings, January 31st 2020
AIM:ZOO Past and Future Earnings, January 31st 2020

We know that ZOO Digital Group has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

A Different Perspective

Investors in ZOO Digital Group had a tough year, with a total loss of 15%, against a market gain of about 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 58%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with ZOO Digital Group .

Of course ZOO Digital Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.