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. To wit, the Endava plc (NYSE:DAVA) share price is 25% higher than it was a year ago, much better than the market return of around 7.4% (not including dividends) in the same period. So that should have shareholders smiling. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
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. 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.
During the last year Endava grew its earnings per share (EPS) by 2.7%. This EPS growth is significantly lower than the 25% increase in the share price. 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 90.38.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Endava’s earnings, revenue and cash flow.
A Different Perspective
It’s nice to see that Endava shareholders have gained 25% over the last year. A substantial portion of that gain has come in the last three months, with the stock up 30% in that time. Demand for the stock from multiple parties is pushing the price higher; it could be that word is getting out about its virtues as a business. It’s always interesting to track share price performance over the longer term. But to understand Endava better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Endava you should know about.
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 US exchanges.
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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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