The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. To wit, the AutoNation, Inc. (NYSE:AN) share price has flown 255% in the last three years. Most would be happy with that. The last week saw the share price soften some 1.8%.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for AutoNation

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

AutoNation was able to grow its EPS at 173% per year over three years, sending the share price higher. The average annual share price increase of 53% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.53.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that AutoNation has rewarded shareholders with a total shareholder return of 5.3% in the last twelve months. Having said that, the five-year TSR of 23% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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 3 warning signs for AutoNation (1 is a bit unpleasant) that you should be aware of.

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.

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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