VeriSign, Inc. (NASDAQ:VRSN) shareholders might be concerned after seeing the share price drop 24% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 142% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn't necessarily mean it's cheap now.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Over half a decade, VeriSign managed to grow its earnings per share at 13% a year. This EPS growth is slower than the share price growth of 19% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
A Different Perspective
While it's never nice to take a loss, VeriSign shareholders can take comfort that their trailing twelve month loss of 12% wasn't as bad as the market loss of around 15%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 19% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand VeriSign better, we need to consider many other factors. Even so, be aware that VeriSign is showing 3 warning signs in our investment analysis , you should know about...
We will like VeriSign better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.