We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example the CarGurus, Inc. (NASDAQ:CARG) share price dropped 62% over five years. That is extremely sub-optimal, to say the least. The falls have accelerated recently, with the share price down 22% in the last three months. Of course, this share price action may well have been influenced by the 10% decline in the broader market, throughout the period.

Since CarGurus has shed US$82m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for CarGurus

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, CarGurus moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

Revenue is actually up 29% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may 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).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think CarGurus will earn in the future (free profit forecasts).

A Different Perspective

It's nice to see that CarGurus shareholders have received a total shareholder return of 24% over the last year. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand CarGurus better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for CarGurus you should know about.

For those who like to find winning investments this free list of growing 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.