Stock Analysis

Investors in Bright Horizons Family Solutions (NYSE:BFAM) have seen favorable returns of 77% over the past year

NYSE:BFAM
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Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Bright Horizons Family Solutions Inc. (NYSE:BFAM) share price is 77% higher than it was a year ago, much better than the market return of around 39% (not including dividends) in the same period. 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 22% in the last three years.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Bright Horizons Family Solutions

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Bright Horizons Family Solutions was able to grow EPS by 56% in the last twelve months. This EPS growth is significantly lower than the 77% increase in the share price. This indicates that the market is now more optimistic about the stock. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 75.10.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:BFAM Earnings Per Share Growth October 30th 2024

We know that Bright Horizons Family Solutions has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Bright Horizons Family Solutions' financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that Bright Horizons Family Solutions shareholders have received a total shareholder return of 77% over one year. Notably the five-year annualised TSR loss of 1.8% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 2 warning signs for Bright Horizons Family Solutions that you should be aware of before investing here.

But note: Bright Horizons Family Solutions 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 American exchanges.

Valuation is complex, but we're here to simplify it.

Discover if Bright Horizons Family Solutions might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.

About NYSE:BFAM

Bright Horizons Family Solutions

Provides early education and childcare, back-up care, educational advisory, and other workplace solutions services for employers and families in the United States, Puerto Rico, the United Kingdom, the Netherlands, Australia, and India.

Proven track record with moderate growth potential.