The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For instance the CyberArk Software Ltd. (NASDAQ:CYBR) share price is 207% higher than it was three years ago. That sort of return is as solid as granite. On top of that, the share price is up 55% in about a quarter.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
CyberArk Software was able to grow its EPS at 17% per year over three years, sending the share price higher. In comparison, the 45% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 93.00.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that CyberArk Software has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
Pleasingly, CyberArk Software's total shareholder return last year was 134%. So this year's TSR was actually better than the three-year TSR (annualized) of 45%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on CyberArk Software you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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