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Introducing Nelnet (NYSE:NNI), The Stock That Dropped 26% In The Last Year

Nelnet, Inc. (NYSE:NNI) shareholders should be happy to see the share price up 11% in the last month. But in truth the last year hasn't been good for the share price. In fact the stock is down 26% in the last year, well below the market return.

See our latest analysis for Nelnet

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Unfortunately Nelnet reported an EPS drop of 36% for the last year. This fall in the EPS is significantly worse than the 26% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NYSE:NNI Past and Future Earnings April 23rd 2020
NYSE:NNI Past and Future Earnings April 23rd 2020

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Nelnet's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Nelnet's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Nelnet's TSR of was a loss of 25% for the year. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Nelnet shareholders are down 25% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 5.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 4 warning signs for Nelnet you should be aware of, and 2 of them don't sit too well with us.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.