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Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Fortinet, Inc. (NASDAQ:FTNT) share price. It's 394% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 25% in about a quarter. But this could be related to the strong market, which is up 14% in the last three months.
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 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, Fortinet managed to grow its earnings per share at 93% a year. The EPS growth is more impressive than the yearly share price gain of 38% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 53.99, the market remains optimistic.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Fortinet has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's good to see that Fortinet has rewarded shareholders with a total shareholder return of 38% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 38% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For example, we've discovered 1 warning sign for Fortinet that you should be aware of before investing here.
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.
This article by Simply Wall St is general in nature. 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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