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It hasn't been the best quarter for XP Inc. (NASDAQ:XP) shareholders, since the share price has fallen 17% in that time. But at least the stock is up over the last year. However, its return of 10% does fall short of the market return of, 25%.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
XP was able to grow EPS by 117% in the last twelve months. It's fair to say that the share price gain of 10% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about XP as it was before. This could be an opportunity. Of course, with a P/E ratio of 56.88, the market remains optimistic.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how XP has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling XP stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
XP shareholders have gained 10% for the year. The bad news is that's no better than the average market return, which was roughly 25%. The stock trailed the market by 30% in that time, testament to the power of passive investing. It might be that investors are more concerned about the business lately due to some fundamental change (or else the share price simply got ahead of itself, previously). It's always interesting to track share price performance over the longer term. But to understand XP better, we need to consider many other factors. For example, we've discovered 2 warning signs for XP (1 is a bit unpleasant!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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