Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. To wit, the Adyen N.V. (AMS:ADYEN) share price is 73% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. So that should have shareholders smiling. We'll need to follow Adyen for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year Adyen grew its earnings per share (EPS) by 90%. This EPS growth is significantly higher than the 73% increase in the share price. So it seems like the market has cooled on Adyen, despite the growth. Interesting. Of course, with a P/E ratio of 125.09, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
It's nice to see that Adyen shareholders have gained 73% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 16% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Adyen 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 NL exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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