Yahoo Finance Investors in Focus Financial Partners (NASDAQ:FOCS) have made a decent return of 57% over the past three years
By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Focus Financial Partners Inc. (NASDAQ:FOCS) shareholders have seen the share price rise 57% over three years, well in excess of the market return (24%, not including dividends).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Focus Financial Partners
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, Focus Financial Partners achieved compound earnings per share growth of 100% per year. The average annual share price increase of 16% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Focus Financial Partners has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Focus Financial Partners' financial health with this free report on its balance sheet.
A Different Perspective
Focus Financial Partners shareholders may not have made money over the last year, but their total loss of 6.7% isn't as bad as the market loss of around 6.7%. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over three years. Given the three year returns are better than the return over the last year, it might be that the broader market has weighed on the stock recently. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Focus Financial Partners (including 2 which are significant) .
But note: Focus Financial Partners may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
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