AssetMark Financial Holdings, Inc. (NYSE:AMK) shareholders will doubtless be very grateful to see the share price up 34% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 17% in the last three years, falling well short of the market return.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
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).
During the unfortunate three years of share price decline, AssetMark Financial Holdings actually saw its earnings per share (EPS) improve by 101% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). 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.
Revenue is actually up 13% over the three years, so the share price drop doesn’t seem to hinge on revenue, either. It’s probably worth investigating AssetMark Financial Holdings further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how AssetMark Financial Holdings has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Pleasingly, AssetMark Financial Holdings’ total shareholder return last year was 3.1%. That certainly beats the loss of about 5% per year over three years. The optimist would say this is evidence that the stock has bottomed, and better days lie ahead. If you would like to research AssetMark Financial Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will 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.
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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.
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