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 Inspecs Group plc (LON:SPEC) share price is 92% higher than it was a year ago, much better than the market return of around 35% (not including dividends) in the same period. So that should have shareholders smiling. Inspecs Group hasn't been listed for long, so it's still not clear if it is a long term winner.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the last twelve months Inspecs Group went from profitable to unprofitable. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. It may be that the company has done well on other metrics.
Inspecs Group's revenue actually dropped 22% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Inspecs Group stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Inspecs Group boasts a total shareholder return of 92% for the last year. A substantial portion of that gain has come in the last three months, with the stock up 27% in that time. This suggests the company is continuing to win over new investors. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Inspecs Group .
But note: Inspecs Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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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