These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the AVEVA Group plc (LON:AVV) share price is 17% higher than it was a year ago, much better than the market decline of around 12% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! AVEVA Group hasn't been listed for long, so it's still not clear if it is a long term winner.
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.
During the last year AVEVA Group grew its earnings per share (EPS) by 106%. It's fair to say that the share price gain of 17% did not keep pace with the EPS growth. So it seems like the market has cooled on AVEVA Group, despite the growth. Interesting. Of course, with a P/E ratio of 103.94, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
AVEVA Group boasts a total shareholder return of 18% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 14% in the last three months. This suggests the company is continuing to win over new investors. It's always interesting to track share price performance over the longer term. But to understand AVEVA Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with AVEVA Group .
AVEVA Group is not the only stock that insiders are buying. 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 GB exchanges.
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. 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.
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