As Afya (NASDAQ:AFYA) grows 4.9% this past week, investors may now be noticing the company's three-year earnings growth
Afya Limited (NASDAQ:AFYA) shareholders should be happy to see the share price up 11% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 30% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While the last three years has been tough for Afya shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
See our latest analysis for Afya
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.
Although the share price is down over three years, Afya actually managed to grow EPS by 19% per year in that time. 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.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We note that, in three years, revenue has actually grown at a 26% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Afya more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Afya has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Afya will earn in the future (free profit forecasts).
A Different Perspective
Afya shareholders gained a total return of 16% during the year. 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 5% per year, over five years. It could well be that the business is stabilizing. Before deciding if you like the current share price, check how Afya scores on these 3 valuation metrics.
For those who like to find winning investments this free list of undervalued 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com