These days it's easy to simply buy an index fund, and your returns should (roughly) match the market.  But you can significantly boost your returns by picking above-average stocks.  For example, the OneSpaWorld Holdings Limited (NASDAQ:OSW) share price is up 48% in the last 1 year, clearly besting the market return of around 22% (not including dividends).  So that should have shareholders smiling.    Also impressive, the stock is up 31% over three years, making long term shareholders happy, too.    

Since the stock has added US$114m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.  

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...'  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).

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

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

However the year on year revenue growth of 28% would help.  We do see some companies suppress earnings in order to accelerate revenue growth.    

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NasdaqCM:OSW Earnings and Revenue Growth June 4th 2024

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

A Different Perspective

It's nice to see that OneSpaWorld Holdings shareholders have received a total shareholder return of 48% over the last year.    That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently.  Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity.        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.   Consider for instance, the ever-present spectre of investment risk.   We've identified 3 warning signs with OneSpaWorld Holdings , and understanding them should be part of your investment process.  

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.