Recent 5.2% pullback isn't enough to hurt long-term ScanSource (NASDAQ:SCSC) shareholders, they're still up 20% over 1 year

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the ScanSource, Inc. (NASDAQ:SCSC) share price is up 20% in the last 1 year, clearly besting the market decline of around 18% (not including dividends). That's a solid performance by our standards! The longer term returns are positive, with the share price up 18% in three years.

In light of the stock dropping 5.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

View our latest analysis for ScanSource

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 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.

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

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

However the year on year revenue growth of 17% would help. We do see some companies suppress earnings in order to accelerate revenue growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that ScanSource has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think ScanSource will earn in the future (free profit forecasts).

A Different Perspective

It's good to see that ScanSource has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Notably the five-year annualised TSR loss of 1.0% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand ScanSource better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with ScanSource , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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