Network International Holdings (LON:NETW) shareholders notch a 46% return over 1 year, yet earnings have been shrinking

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Network International Holdings plc (LON:NETW) share price is up 46% in the last 1 year, clearly besting the market return of around 23% (not including dividends). So that should have shareholders smiling. Network International Holdings hasn't been listed for long, so it's still not clear if it is a long term winner.

Since the stock has added US$121m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Network International Holdings

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, Network International Holdings actually saw its earnings per share drop 51%.

So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

Network International Holdings' revenue actually dropped 3.2% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth

This free interactive report on Network International Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Network International Holdings shareholders should be happy with the total gain of 46% over the last twelve months. We regret to report that the share price is down 2.9% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. 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. Even so, be aware that Network International Holdings is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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

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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