Update: IG Group Holdings (LON:IGG) Stock Gained 36% In The Last Year

Diversification is a key tool for dealing with stock price volatility. But if you're going to beat the market overall, you need to have individual stocks that outperform. IG Group Holdings plc (LON:IGG) has done well over the last year, with the stock price up 36% beating the market return of 34% (not including dividends). Having said that, the longer term returns aren't so impressive, with stock gaining just 5.4% in three years.

Check out our latest analysis for IG Group Holdings

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 IG Group Holdings grew its earnings per share (EPS) by 130%. It's fair to say that the share price gain of 36% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about IG Group Holdings as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 9.10.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on IG Group Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for IG Group Holdings the TSR over the last year was 44%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

IG Group Holdings shareholders have received returns of 44% over twelve months (even including dividends), which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 7%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand IG Group Holdings better, we need to consider many other factors. For instance, we've identified 2 warning signs for IG Group Holdings that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are 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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