Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the j2 Global, Inc. (NASDAQ:JCOM) share price is up 78% in the last 5 years, clearly besting than the market return of around 42% (ignoring dividends).
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Check out our latest analysis for j2 Global
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, j2 Global managed to grow its earnings per share at 3.9% a year. This EPS growth is slower than the share price growth of 12% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on j2 Global's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Dividend Lost
It's important to keep in mind that we've been talking about the share price returns, which don't include dividends, while the total shareholder return does. By accounting for the value of dividends paid, the TSR can be seen as a more complete measure of the value a company brings to its shareholders. j2 Global's TSR over the last 5 years is 95%; better than its share price return. Even though the company isn't paying dividends at the moment, it has done in the past.
A Different Perspective
While the broader market gained around 5.2% in the last year, j2 Global shareholders lost 0.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 14% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before spending more time on j2 Global it might be wise to click here to see if insiders have been buying or selling shares.