While some are satisfied with an index fund, active investors aim to find truly magnificent investments on the stock market. When you find (and hold) a big winner, you can markedly improve your finances. For example, the Futu Holdings Limited (NASDAQ:FUTU) share price is up a whopping 428% in the last year, a handsome return in a single year. Also pleasing for shareholders was the 77% gain in the last three months. We'll need to follow Futu Holdings for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Futu Holdings grew its earnings per share (EPS) by 327%. This EPS growth is significantly lower than the 428% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago. The fairly generous P/E ratio of 64.80 also points to this optimism.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Futu Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on Futu Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Futu Holdings boasts a total shareholder return of 428% for the last year. The more recent returns haven't been as impressive as the longer term returns, coming in at just 77%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). 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 3 warning signs with Futu Holdings , and understanding them should be part of your investment process.
Of course Futu Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
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