54% earnings growth over 1 year has not materialized into gains for GoDaddy (NYSE:GDDY) shareholders over that period
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in GoDaddy Inc. (NYSE:GDDY) have tasted that bitter downside in the last year, as the share price dropped 13%. That's well below the market decline of 5.7%. The silver lining (for longer term investors) is that the stock is still 2.0% higher than it was three years ago. It's down 15% in about a quarter.
After losing 5.4% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
View our latest analysis for GoDaddy
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 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).
During the unfortunate twelve months during which the GoDaddy share price fell, it actually saw its earnings per share (EPS) improve by 54%. Of course, the situation might betray previous over-optimism about growth.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
GoDaddy managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
GoDaddy is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We regret to report that GoDaddy shareholders are down 13% for the year. Unfortunately, that's worse than the broader market decline of 5.7%. 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. Longer term investors wouldn't be so upset, since they would have made 0.7%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand GoDaddy better, we need to consider many other factors. For instance, we've identified 3 warning signs for GoDaddy (1 is significant) that you should be aware of.
But note: GoDaddy may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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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