AO World (LON:AO.) hikes 11% this week, taking one-year gains to 79%

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. For example, the AO World plc (LON:AO.) share price is up 79% in the last 1 year, clearly besting the market decline of around 0.2% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 76% in the last three years.

The past week has proven to be lucrative for AO World investors, so let's see if fundamentals drove the company's one-year performance.

View our latest analysis for AO World

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 AO World grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

Unfortunately AO World's fell 14% 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 below how earnings and revenue have 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. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on AO World

A Different Perspective

We're pleased to report that AO World shareholders have received a total shareholder return of 79% over one year. There's no doubt those recent returns are much better than the TSR loss of 4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

AO World is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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