The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. Take, for example Finance of America Companies Inc. (NYSE:FOA). Its share price is already up an impressive 169% in the last twelve months. Better yet, the share price has gained 183% in the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. On the other hand, longer term shareholders have had a tougher run, with the stock falling 63% in three years.
The past week has proven to be lucrative for Finance of America Companies investors, so let's see if fundamentals drove the company's one-year performance.
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. 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.
Finance of America Companies went from making a loss to reporting a profit, in the last year.
We think the growth looks very prospective, so we're not surprised the market liked it too. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Finance of America Companies' earnings, revenue and cash flow.
A Different Perspective
It's good to see that Finance of America Companies has rewarded shareholders with a total shareholder return of 169% in the last twelve months. That certainly beats the loss of about 12% per year over the last half decade. 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. 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 - Finance of America Companies has 4 warning signs (and 3 which don't sit too well with us) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.