Signify Health's (NYSE:SGFY) 71% YoY earnings expansion surpassed the shareholder returns over the past year
Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Signify Health, Inc. (NYSE:SGFY) share price is up 69% in the last 1 year, clearly besting the market decline of around 16% (not including dividends). That's a solid performance by our standards! We'll need to follow Signify Health for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
Check out our latest analysis for Signify Health
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Signify Health grew its earnings per share, moving from a loss to a profit.
The company was close to break-even last year, so earnings per share of US$0.43 isn't particularly stand out. But judging by the share price, the market is happy with the maiden profit. Some investors scan for companies that have just become profitable, since that's an important business development milestone.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Signify Health's earnings, revenue and cash flow.
A Different Perspective
Signify Health shareholders should be happy with the total gain of 69% over the last twelve months. The more recent returns haven't been as impressive as the longer term returns, coming in at just 6.9%. Having said that, we doubt shareholders would be concerned. It seems the market is simply waiting on more information, because if the business delivers so will the share price (eventually). While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Signify Health , and understanding them should be part of your investment process.
Signify Health is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
