AO World (LON:AO.) Shareholders Have Enjoyed A Whopping 318% Share Price Gain

It hasn't been the best quarter for AO World plc (LON:AO.) shareholders, since the share price has fallen 22% in that time. But that cannot eclipse the spectacular share price rise we've seen over the last twelve months. In that time, shareholders have had the pleasure of a 318% boost to the share price. So we wouldn't blame sellers for taking some profits. Only time will tell if there is still too much optimism currently reflected in the share price.

Check out our latest analysis for AO World

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 AO World grew its earnings per share, moving from a loss to a profit.

The company was close to break-even last year, so earnings per share of UK£0.048 isn't particularly stand out. But judging by the share price, the market is very pleased with the milestone of reaching profitability. Inflection points like this can be a great time to take a closer look at a company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of AO World's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that AO World shareholders have received a total shareholder return of 318% over one year. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should be aware of the 1 warning sign we've spotted with AO World .

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.

When trading AO World or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.