One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, the GoDaddy Inc. (NYSE:GDDY) share price is up 100% in the last three years, clearly besting the market return of around 41% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 2.0%.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
GoDaddy became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how GoDaddy has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at GoDaddy's financial health with this free report on its balance sheet.
A Different Perspective
Over the last year GoDaddy shareholders have received a TSR of 2.0%. Unfortunately this falls short of the market return of around 16%. At least the longer term returns (running at about 26% a year, are better. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. Before spending more time on GoDaddy it might be wise to click here to see if insiders have been buying or selling shares.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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. Thank you for reading.