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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 PagSeguro Digital Ltd. (NYSE:PAGS) share price is up 61% in the last year, clearly besting the market return of around 21% (not including dividends). That's a solid performance by our standards! PagSeguro Digital hasn't been listed for long, so it's still not clear if it is a long term winner.
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.
Over the last twelve months, PagSeguro Digital actually shrank its EPS by 1.2%.
The mild decline in EPS may be a result of the fact that the company is more focused on other aspects of the business, right now. 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.
We think that the revenue growth of 21% could have some investors interested. 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).
PagSeguro Digital is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think PagSeguro Digital will earn in the future (free analyst consensus estimates)
A Different Perspective
PagSeguro Digital boasts a total shareholder return of 61% for the last year. And the share price momentum remains respectable, with a gain of 47% in the last three months. This suggests the company is continuing to win over new investors. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for PagSeguro Digital (1 is a bit unpleasant) that you should be aware of.
We will like PagSeguro Digital better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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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