Align Technology's (NASDAQ:ALGN) investors will be pleased with their massive 528% return over the last five years
Align Technology, Inc. (NASDAQ:ALGN) shareholders might be concerned after seeing the share price drop 14% in the last quarter. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 528% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. It really delights us to see such great share price performance for investors.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Align Technology
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Align Technology managed to grow its earnings per share at 31% a year. This EPS growth is lower than the 44% average annual increase in the share price. 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. This optimism is visible in its fairly high P/E ratio of 66.04.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Align Technology has grown profits over the years, but the future is more important for shareholders. This free interactive report on Align Technology's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
Align Technology's TSR for the year was broadly in line with the market average, at 19%. It has to be noted that the recent return falls short of the 44% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Align Technology a stock worth watching. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Align Technology you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
