Investors in GoDaddy (NYSE:GDDY) have seen decent returns of 55% over the past year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the GoDaddy Inc. (NYSE:GDDY) share price is 55% higher than it was a year ago, much better than the market return of around 19% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! It is also impressive that the stock is up 42% over three years, adding to the sense that it is a real winner.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for GoDaddy

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 GoDaddy grew its earnings per share (EPS) by 318%. It's fair to say that the share price gain of 55% did not keep pace with the EPS growth. So it seems like the market has cooled on GoDaddy, despite the growth. Interesting.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how GoDaddy has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that GoDaddy shareholders have received a total shareholder return of 55% over one year. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we've discovered 4 warning signs for GoDaddy (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

We will like GoDaddy better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.