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.  To wit, the PetIQ, Inc. (NASDAQ:PETQ) share price is 54% higher than it was a year ago, much better than the market return of around 26% (not including dividends) in the same period.  That's a solid performance by our standards!     Zooming out, the stock is actually down 51% in the last three years.    

Since the stock has added US$53m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.  

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance.  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).

PetIQ went from making a loss to reporting a profit, in the last year.

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.

However the year on year revenue growth of 20% would help.  We do see some companies suppress earnings in order to accelerate revenue growth.    

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqGS:PETQ Earnings and Revenue Growth May 14th 2024

It is of course excellent to see how PetIQ has grown profits over the years, but the future is more important for shareholders.  Take a more thorough look at PetIQ's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that PetIQ shareholders have received a total shareholder return of 54% over one year.    Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance.  This makes us a little wary, but the business might have turned around its fortunes.        It's always interesting to track share price performance over the longer term. But to understand PetIQ better, we need to consider many other factors.   Case in point: We've spotted   2 warning signs for PetIQ  you should be aware of, and 1 of them is significant.    

Of course PetIQ may not be the best stock to buy. So you may wish to see this free 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.

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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.