Investors more bullish on ScanSource (NASDAQ:SCSC) this week as stock advances 6.0%, despite earnings trending downwards over past 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 ScanSource, Inc. (NASDAQ:SCSC) share price is up 71% in the last 1 year, clearly besting the market return of around 17% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Looking back further, the stock price is 68% higher than it was three years ago.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

View our latest analysis for ScanSource

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, ScanSource actually saw its earnings per share drop 13%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

Unfortunately ScanSource's fell 9.0% over twelve months. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that ScanSource has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on ScanSource'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 ScanSource shareholders have received a total shareholder return of 71% over one year. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 1 warning sign we've spotted with ScanSource .

Of course ScanSource may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.