Shareholders in PayPal Holdings (NASDAQ:PYPL) are in the red if they invested a year ago

As every investor would know, you don't hit a homerun every time you swing. But it should be a priority to avoid stomach churning catastrophes, wherever possible. So we hope that those who held PayPal Holdings, Inc. (NASDAQ:PYPL) during the last year don't lose the lesson, in addition to the 75% hit to the value of their shares. While some investors are willing to stomach this sort of loss, they are usually professionals who spread their bets thinly. Notably, shareholders had a tough run over the longer term, too, with a drop of 38% in the last three years. The falls have accelerated recently, with the share price down 27% in the last three months. But this could be related to the weak market, which is down 13% in the same period.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for PayPal Holdings

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.

Unhappily, PayPal Holdings had to report a 31% decline in EPS over the last year. This reduction in EPS is not as bad as the 75% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on PayPal Holdings' earnings, revenue and cash flow.

A Different Perspective

We regret to report that PayPal Holdings shareholders are down 75% for the year. Unfortunately, that's worse than the broader market decline of 16%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for PayPal Holdings you should know about.

PayPal Holdings is not the only stock that insiders are buying. 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 US 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.

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