These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the The Pennant Group, Inc. (NASDAQ:PNTG) share price is up 80% in the last year, clearly besting the market return of around 21% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Pennant Group hasn't been listed for long, so it's still not clear if it is a long term winner.
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.
Over the last twelve months, Pennant Group actually shrank its EPS by 21%.
So we don't think that investors are paying too much attention to 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 15% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
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 Pennant Group's financial health with this free report on its balance sheet.
A Different Perspective
Pennant Group shareholders should be happy with the total gain of 80% over the last twelve months. And the share price momentum remains respectable, with a gain of 68% in the last three months. This suggests the company is continuing to win over new investors. It's always interesting to track share price performance over the longer term. But to understand Pennant Group better, we need to consider many other factors. For example, we've discovered 3 warning signs for Pennant Group that you should be aware of before investing here.
Of course Pennant Group 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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