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Further weakness as Allegiant Travel (NASDAQ:ALGT) drops 10% this week, taking one-year losses to 38%

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The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Allegiant Travel Company (NASDAQ:ALGT) share price slid 38% over twelve months. That's disappointing when you consider the market declined 9.4%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 3.6% in three years. Furthermore, it's down 19% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 16% in the same timeframe.

If the past week is anything to go by, investor sentiment for Allegiant Travel isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Allegiant Travel

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).

Allegiant Travel managed to increase earnings per share from a loss to a profit, over the last 12 months.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action. But we may find different metrics more enlightening.

Allegiant Travel's revenue is actually up 124% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

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

earnings-and-revenue-growth
earnings-and-revenue-growth

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. This free report showing analyst forecasts should help you form a view on Allegiant Travel

A Different Perspective

We regret to report that Allegiant Travel shareholders are down 38% for the year. Unfortunately, that's worse than the broader market decline of 9.4%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 0.9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Allegiant Travel is showing 4 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you are like me, then you will not want to miss this free list of growing 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 US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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