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. For example, the Avast Plc (LON:AVST) share price is up 35% in the last year, clearly besting than the market return of around -5.0% (not including dividends). So that should have shareholders smiling. Note that businesses generally develop over the long term, so the returns over the last year might not reflect a long term trend.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 Avast 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.
We think that the revenue growth of 24% could have some investors interested. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
We know that Avast has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Avast shareholders should be happy with the total gain of 35% over the last twelve months, including dividends. That’s better than the more recent three month gain of 1.9%, implying that share price has plateaued recently. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). Importantly, we haven’t analysed Avast’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
But note: Avast 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.