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Overstock.com (NASDAQ:OSTK) shareholders are still up 195% over 3 years despite pulling back 10% in the past week

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Overstock.com, Inc. (NASDAQ:OSTK) shareholders might understandably be very concerned that the share price has dropped 34% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 195% higher than it was. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.

Although Overstock.com has shed US$155m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Overstock.com

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Overstock.com became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Overstock.com's earnings, revenue and cash flow.

A Different Perspective

We regret to report that Overstock.com shareholders are down 56% for the year. Unfortunately, that's worse than the broader market decline of 9.0%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 17%, 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. 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. For instance, we've identified 2 warning signs for Overstock.com that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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