The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the LKQ Corporation (NASDAQ:LKQ) share price is up 39% in the last year, clearly besting the market return of around 19% (not including dividends). That's a solid performance by our standards! However, the stock hasn't done so well in the longer term, with the stock only up 4.3% in three years.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year, LKQ actually saw its earnings per share drop 23%.
Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
However the year on year revenue growth of 10% would help. We do see some companies suppress earnings in order to accelerate revenue growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think LKQ will earn in the future (free profit forecasts).
A Different Perspective
We're pleased to report that LKQ shareholders have received a total shareholder return of 39% over one year. That's better than the annualised return of 5.2% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before spending more time on LKQ 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 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.
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.