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If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Bentley Systems, Incorporated (NASDAQ:BSY) share price is 94% higher than it was a year ago, much better than the market return of around 36% (not including dividends) in the same period. That's a solid performance by our standards! Bentley Systems hasn't been listed for long, so it's still not clear if it is a long term winner.
In light of the stock dropping 8.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.
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 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.
Bentley Systems was able to grow EPS by 21% in the last twelve months. The share price gain of 94% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 125.86.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Bentley Systems has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
Bentley Systems boasts a total shareholder return of 95% for the last year (that includes the dividends) . The more recent returns haven't been as impressive as the longer term returns, coming in at just 5.1%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). It's always interesting to track share price performance over the longer term. But to understand Bentley Systems better, we need to consider many other factors. Even so, be aware that Bentley Systems is showing 3 warning signs in our investment analysis , you should know about...
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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. 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.
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