One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Plexus Corp. ( NASDAQ:PLXS ), which is up 62%, over three years, soundly beating the market return of 39% (not including dividends).
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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 three years of share price growth, Plexus moved from a loss to profitability. So we would expect a higher share price over the period.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Plexus has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts .
A Different Perspective
While the broader market gained around 1.4% in the last year, Plexus shareholders lost 6.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 8.1%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you would like to research Plexus in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.