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Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term ScanSource, Inc. (NASDAQ:SCSC) shareholders for doubting their decision to hold, with the stock down 13% over a half decade. There was little comfort for shareholders in the last week as the price declined a further 4.6%.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate half decade during which the share price slipped, ScanSource actually saw its earnings per share (EPS) improve by 9.6% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS. It's strange to see such muted share price performance despite sustained growth. Perhaps a clue lies in other metrics.
In contrast to the share price, revenue has actually increased by 6.2% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We know that ScanSource has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think ScanSource will earn in the future (free profit forecasts)
A Different Perspective
ScanSource shareholders are up 1.2% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 2.8% per year, over five years. So this might be a sign the business has turned its fortunes around. If you would like to research ScanSource in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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 firstname.lastname@example.org. 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.