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Is Ceridian HCM Holding's (NYSE:CDAY) 122% Share Price Increase Well Justified?

·3 min read

While Ceridian HCM Holding Inc. (NYSE:CDAY) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 122% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. Only time will tell if there is still too much optimism currently reflected in the share price.

See our latest analysis for Ceridian HCM Holding

Ceridian HCM Holding wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over the last three years Ceridian HCM Holding has grown its revenue at 7.2% annually. That's not a very high growth rate considering it doesn't make profits. In comparison, the share price rise of 30% per year over the last three years is pretty impressive. We'd need to take a closer look at the revenue and profit trends to see whether the improvements might justify that sort of increase. It seems likely that the market is pretty optimistic about Ceridian HCM Holding, given it is losing money.

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

Ceridian HCM Holding is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. 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

Ceridian HCM Holding produced a TSR of 38% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 51%. On the bright side that gain is actually better than the average return of 30% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. It's always interesting to track share price performance over the longer term. But to understand Ceridian HCM Holding better, we need to consider many other factors. For example, we've discovered 2 warning signs for Ceridian HCM Holding that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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. 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.

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