If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Playtech plc (LON:PTEC) share price is 46% higher than it was a year ago, much better than the market decline of around 6.8% (not including dividends) in the same period. That's a solid performance by our standards! On the other hand, longer term shareholders have had a tougher run, with the stock falling 38% in three years.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 Playtech saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
Unfortunately Playtech's fell 11% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Playtech
A Different Perspective
It's nice to see that Playtech shareholders have received a total shareholder return of 46% over the last year. There's no doubt those recent returns are much better than the TSR loss of 5% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Playtech better, we need to consider many other factors. For instance, we've identified 2 warning signs for Playtech (1 is potentially serious) that you should be aware of.
Playtech is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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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