Those who invested in Payfare (TSE:PAY) a year ago are up 35%

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can significantly boost your returns by picking above-average stocks. For example, the Payfare Inc. (TSE:PAY) share price is up 35% in the last 1 year, clearly besting the market decline of around 4.0% (not including dividends). That's a solid performance by our standards! Payfare hasn't been listed for long, so it's still not clear if it is a long term winner.

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 Payfare

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. 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.

During the last year Payfare grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We think that the revenue growth of 91% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth

It is of course excellent to see how Payfare has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Payfare boasts a total shareholder return of 35% for the last year. The more recent returns haven't been as impressive as the longer term returns, coming in at just 5.7%. It seems likely the market is waiting on fundamental developments with the business before pushing the share price higher (or lower). Before spending more time on Payfare it might be wise to click here to see if insiders have been buying or selling shares.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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