This week we saw the LendingClub Corporation (NYSE:LC) share price climb by 10%. Meanwhile over the last three years the stock has dropped hard. In that time, the share price dropped 55%. So the improvement may be a real relief to some. The rise has some hopeful, but turnarounds are often precarious.
On a more encouraging note the company has added US$86m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
LendingClub became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So it's worth looking at other metrics to try to understand the share price move.
We note that, in three years, revenue has actually grown at a 30% 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 LendingClub more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
NYSE:LC Earnings and Revenue Growth March 22nd 2024
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on LendingClub
A Different Perspective
LendingClub shareholders are up 27% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 7% endured over half a decade. It could well be that the business is stabilizing. 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. Take risks, for example - LendingClub has 3 warning signs (and 1 which is concerning) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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