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Does Cactus's (NYSE:WHD) Share Price Gain of 35% Match Its Business Performance?

Simply Wall St

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Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Cactus, Inc. (NYSE:WHD) share price is 35% higher than it was a year ago, much better than the market return of around 6.5% (not including dividends) in the same period. So that should have shareholders smiling. Note that businesses generally develop over the long term, so it the returns over the last year might not reflect a long term trend.

Check out our latest analysis for Cactus

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, Cactus actually saw its earnings per share drop 100%. Given the share price gain, we doubt the market is measuring progress with EPS. 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.

However the year on year revenue growth of 59% would help. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.

Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NYSE:WHD Income Statement, March 27th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. If you are thinking of buying or selling Cactus stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

It's nice to see that Cactus shareholders have gained 35% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 33% 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. If you would like to research Cactus in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

But note: Cactus 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 US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.