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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For example, the Radian Group Inc. (NYSE:RDN) share price has soared 126% in the last three years. How nice for those who held the stock! It's also good to see the share price up 13% over the last quarter.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Radian Group was able to grow its EPS at 35% per year over three years, sending the share price higher. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 31% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Radian Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Radian Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Radian Group has rewarded shareholders with a total shareholder return of 37% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 8.9%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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 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.