It hasn’t been the best quarter for Ebix, Inc. (NASDAQ:EBIX) shareholders, since the share price has fallen 14% in that time. But the silver lining is the stock is up over five years. In that time, it is up 57%, which isn’t bad, but is below the market return of 73%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 36% decline over the last twelve months.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
Over half a decade, Ebix managed to grow its earnings per share at 11% a year. This EPS growth is reasonably close to the 9.4% average annual increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. 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).
Dive deeper into Ebix’s key metrics by checking this interactive graph of Ebix’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Ebix’s TSR for the last 5 years was 62%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Ebix had a tough year, with a total loss of 35% (including dividends) , against a market gain of about 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Ebix (of which 1 is a bit concerning!) you should know about.
Of course Ebix may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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