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Investors in Pason Systems (TSE:PSI) have made a return of 24% over the past year

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Pason Systems Inc. (TSE:PSI) share price is 21% higher than it was a year ago, much better than the market decline of around 5.4% (not including dividends) in the same period. That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 8.4% in three years.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Pason Systems

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

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Pason Systems was able to grow EPS by 306% in the last twelve months. It's fair to say that the share price gain of 21% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Pason Systems as it was before. This could be an opportunity.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Pason Systems' earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Pason Systems, it has a TSR of 24% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Pason Systems shareholders have received a total shareholder return of 24% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 1.1%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 1 warning sign for Pason Systems that you should be aware of before investing here.

Pason Systems is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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 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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