The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. One great example is AutoNation, Inc. (NYSE:AN) which saw its share price drive 259% higher over five years. It's also good to see the share price up 11% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 5.0% in 90 days).

Since it's been a strong week for AutoNation shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for AutoNation

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, AutoNation managed to grow its earnings per share at 35% a year. So the EPS growth rate is rather close to the annualized share price gain of 29% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

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

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on AutoNation's earnings, revenue and cash flow.

A Different Perspective

AutoNation provided a TSR of 17% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 29% per year for 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 AutoNation better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for AutoNation (of which 1 is a bit unpleasant!) you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are 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.