Introducing Goosehead Insurance (NASDAQ:GSHD), A Stock That Climbed 71% In The Last Year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Goosehead Insurance, Inc (NASDAQ:GSHD) share price is up 71% in the last year, clearly besting the market return of around 20% (not including dividends). So that should have shareholders smiling. We'll need to follow Goosehead Insurance for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.

View our latest analysis for Goosehead Insurance

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Goosehead Insurance went from making a loss to reporting a profit, in the last year.

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 39% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that Goosehead Insurance has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Goosehead Insurance in this interactive graph of future profit estimates.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Goosehead Insurance's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Goosehead Insurance hasn't been paying dividends, but its TSR of 74% exceeds its share price return of 71%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

Goosehead Insurance shareholders should be happy with the total gain of 74% over the last twelve months. A substantial portion of that gain has come in the last three months, with the stock up 22% in that time. This suggests the company is continuing to win over new investors. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Goosehead Insurance you should be aware of.

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 US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.