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If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the i3 Verticals, Inc. (NASDAQ:IIIV) share price is up 56% in the last year, clearly besting than the market return of around 4.1% (not including dividends). So that should have shareholders smiling. i3 Verticals 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 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.
i3 Verticals went from making a loss to reporting a profit, in the last year. The company was close to break-even last year, so earnings per share of US$0.79 isn't particularly stand out. But judging by the share price, the market is happy with the maiden profit. Inflection points like this can be a great time to take a closer look at a company.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on i3 Verticals's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
i3 Verticals shareholders should be happy with the total gain of 56% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 20% in that time. This suggests the company is continuing to win over new investors. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
i3 Verticals is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
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 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. Thank you for reading.