Stock Analysis

Inpro's (WSE:INP) three-year earnings growth trails the 21% YoY shareholder returns

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One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Inpro S.A. (WSE:INP), which is up 55%, over three years, soundly beating the market return of 35% (not including dividends).

Since it's been a strong week for Inpro shareholders, let's have a look at trend of the longer term fundamentals.

View our latest analysis for Inpro

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Inpro was able to grow its EPS at 6.2% per year over three years, sending the share price higher. In comparison, the 16% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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

WSE:INP Earnings Per Share Growth April 1st 2023

It might be well worthwhile taking a look at our free report on Inpro's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Inpro's TSR for the last 3 years was 78%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

The total return of 12% received by Inpro shareholders over the last year isn't far from the market return of -11%. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. 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 2 warning signs we've spotted with Inpro .

But note: Inpro 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 Polish exchanges.

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