The last three months have been difficult Digital Turbine, Inc. (NASDAQ:APPS) shareholders, who saw the share price drop a rather worrying 34%. But that doesn’t change the fact that returns over the past half-decade have been spectacular. During this period, the stock price rose by 851%! We can probably expect the recent drop after such a strong rise. Only time will tell if there is still too much optimism currently reflected in the stock price. Unfortunately, not all shareholders will have held onto it for the long term, so spare a thought for those caught up in the 84% decline over the past twelve months. We are really pleased to see such a great share price performance for investors.
Last week proved lucrative for Digital Turbine investors, so let’s see if fundamentals have driven the company’s five-year performance.
Our analysis indicates that APPS is potentially undervalued!
In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
In the five years of share price growth, Digital Turbine has gone from loss to profitability. Sometimes the onset of profitability is a major inflection point that can signal rapid earnings growth ahead, which in turn justifies very strong share price gains.
The company’s earnings per share (over time) is shown in the image below (click to see exact numbers).
We appreciate the fact that insiders have been buying stocks over the past twelve months. That said, most people consider profit and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a careful review of historical growth trends, available here.
A different perspective
While the broader market lost around 24% in the twelve months, Digital Turbine shareholders fared even worse, losing 84%. That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer-term investors wouldn’t be so upset, as they would have gained 57%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. While it’s worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Example: we have identified 4 warning signs for Digital Turbine you should be aware.
There are many other companies whose insiders buy shares. You probably do not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
Valuation is complex, but we help make it simple.
Find out if digital turbine is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
