GoDaddy (NYSE:GDDY) sheds 3.9% this week, as yearly returns fall more in line with earnings growth

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the GoDaddy Inc. (NYSE:GDDY) share price is 143% higher than it was three years ago. That sort of return is as solid as granite. On the other hand, the stock price has retraced 3.9% in the last week. But this could be related to the soft market, with stocks selling off around 2.7% in the last week.

While the stock has fallen 3.9% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

GoDaddy was able to grow its EPS at 43% per year over three years, sending the share price higher. The average annual share price increase of 34% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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

It is of course excellent to see how GoDaddy has grown profits over the years, but the future is more important for shareholders. This free interactive report on GoDaddy's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that GoDaddy shareholders have received a total shareholder return of 30% over one year. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 3 warning signs for GoDaddy that you should be aware of before investing here.

We will like GoDaddy better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.