Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Zebra Technologies Corporation (NASDAQ:ZBRA) share price is 83% higher than it was a year ago, much better than the market return of around 38% (not including dividends) in the same period. So that should have shareholders smiling. Zooming out, the stock is actually down 29% in the last three years.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Zebra Technologies
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 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 the last year, Zebra Technologies actually saw its earnings per share drop 64%.
So we don’t think that investors are paying too much attention to EPS. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
Zebra Technologies’ revenue actually dropped 21% over last year. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
The image below shows how earnings and revenue have 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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Zebra Technologies
A Different Perspective
It’s good to see that Zebra Technologies has rewarded shareholders with a total shareholder return of 83% in the last twelve months. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 – Zebra Technologies has 3 warning signs we think you should be aware of.
Zebra Technologies is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
