Yahoo Finance The one-year decline in earnings for Landsea Homes NASDAQ:LSEA) isn't encouraging, but shareholders are still up 65% over that period
Landsea Homes Corporation (NASDAQ:LSEA) shareholders have seen the share price descend 25% over the month. But looking back over the last year, the returns have actually been rather pleasing! Looking at the full year, the company has easily bested an index fund by gaining 65%.
While the stock has fallen 13% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
View our latest analysis for Landsea Homes
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Over the last twelve months, Landsea Homes actually shrank its EPS by 55%.
This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
Landsea Homes' revenue actually dropped 8.0% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Landsea Homes will earn in the future (free profit forecasts).
A Different Perspective
It's nice to see that Landsea Homes shareholders have received a total shareholder return of 65% over the last year. There's no doubt those recent returns are much better than the TSR loss of 0.2% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Landsea Homes better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Landsea Homes (at least 1 which makes us a bit uncomfortable) , 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 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.
