The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Encore Capital Group, Inc. (NASDAQ:ECPG) has fallen short of that second goal, with a share price rise of 30% over five years, which is below the market return. The last year hasn't been great either, with the stock up just 2.0%.

Although Encore Capital Group has shed US$55m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Encore Capital Group actually saw its EPS drop 29% per year. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.

This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

The revenue reduction of 3.1% per year is not a positive. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

If you are thinking of buying or selling Encore Capital Group stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Encore Capital Group shareholders are up 2.0% for the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 5% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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...

We will like Encore Capital Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.