It's easy to buy index funds these days, and your returns should (mostly) match the market. But the truth is, if you buy a quality business at the right price, you can make big profits. for example, Intercontinental Exchange Co., Ltd. (NYSE:ICE) stock is up 85% over the past five years, slightly outperforming the market return. It's also good that he had a healthy 39% increase last year.
With that in mind, it's worth checking whether a company's underlying fundamentals are driving its long-term performance, or if there are any discrepancies.
Check out our latest analysis for Intercontinental Exchange.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. One way he looks at how market sentiment has changed over time is to look at the interaction between a company's stock price and his earnings per share (EPS).
During the five-year period of share price growth, Intercontinental Exchange achieved compound earnings per share (EPS) growth of 3.6% per year. This EPS growth rate is lower than the average annual increase in the share price of 13%. This suggests that market participants have been valuing the company highly recently. This isn't necessarily surprising, given its track record of profit growth over the past five years.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Intercontinental Exchange has been improving its earnings lately, but will its earnings grow? If you're interested, check this out free A report showing consensus revenue forecasts.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital increases and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. Coincidentally, Intercontinental Exchange's TSR over the past five years was 98%, which is better than the share price return mentioned above. Therefore, the dividend paid by the company is total Shareholder returns.
different perspective
We're pleased to report that Intercontinental Exchange shareholders received a total shareholder return of 41% over one year. Of course, this includes dividends. The stock appears to have performed better of late, as the 1-year TSR is better than his 5-year TSR (the latter at 15% per annum). Optimists might think that the recent improvement in TSR indicates that the business itself is improving over time. It's always interesting to track stock performance over the long term. However, to better understand Intercontinental Exchange, you need to consider many other factors. For example, consider the ever-present fear of investment risk. We've identified 2 warning signs for you They are affiliated with the Intercontinental Exchange (at least one of which is less desirable), and understanding them should be part of your investment process.
of course Intercontinental Exchange may not be the best stock to buy.So you might want to see this free A collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
