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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Ebix, Inc. (NASDAQ:EBIX) share price is up 59% in the last 1 year, clearly besting the market return of around 31% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 45% lower than it was three years ago.
Since it's been a strong week for Ebix shareholders, let's have a look at trend of the longer term fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last year, Ebix actually saw its earnings per share drop 10.0%.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We are skeptical of the suggestion that the 1.0% dividend yield would entice buyers to the stock. We think that the revenue growth of 68% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Ebix's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that Ebix shareholders have received a total shareholder return of 61% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Ebix (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
We will like Ebix better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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. 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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