Yahoo Finance If You Had Bought Inspiration Healthcare Group (LON:IHC) Stock Three Years Ago, You Could Pocket A 25% Gain Today
By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Inspiration Healthcare Group plc (LON:IHC), which is up 25%, over three years, soundly beating the market return of -23% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 11%.
See our latest analysis for Inspiration Healthcare Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Inspiration Healthcare Group achieved compound earnings per share growth of 7.0% per year. We note that the 7.6% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Pleasingly, Inspiration Healthcare Group's total shareholder return last year was 11%. That gain actually surpasses the 7.6% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting Inspiration Healthcare Group on your watchlist. 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. Take risks, for example - Inspiration Healthcare Group has 2 warning signs (and 1 which is potentially serious) we think you should know about.
Inspiration Healthcare 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.
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.
