Encore Capital Group (NASDAQ:ECPG) spikes 13% this week, taking five-year gains to 49%

Encore Capital Group, Inc. (NASDAQ:ECPG) shareholders might understandably be very concerned that the share price has dropped 31% in the last quarter. On the bright side the share price is up over the last half decade. Unfortunately its return of 49% is below the market return of 106%. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 41% in the last three years.

The past week has proven to be lucrative for Encore Capital Group investors, so let's see if fundamentals drove the company's five-year performance.

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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.

We know that Encore Capital Group has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. So we might find other metrics can better explain the share price movements.

The revenue reduction of 4.3% per year is not a positive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

While the broader market gained around 9.3% in the last year, Encore Capital Group shareholders lost 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Encore Capital Group better, we need to consider many other factors. Even so, be aware that Encore Capital Group is showing 1 warning sign in our investment analysis , you should know about...

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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.