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Canadian Solar (NASDAQ:CSIQ) sheds 6.8% this week, as yearly returns fall more in line with earnings growth

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·3 min read
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It might be of some concern to shareholders to see the Canadian Solar Inc. (NASDAQ:CSIQ) share price down 23% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. It's fair to say most would be happy with 107% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 33% decline over the last twelve months.

Although Canadian Solar has shed US$114m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

View our latest analysis for Canadian Solar

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.

During five years of share price growth, Canadian Solar achieved compound earnings per share (EPS) growth of 5.5% per year. This EPS growth is slower than the share price growth of 16% 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 graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into Canadian Solar's key metrics by checking this interactive graph of Canadian Solar's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 7.6% in the twelve months, Canadian Solar shareholders did even worse, losing 33%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Canadian Solar better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with Canadian Solar (including 2 which are a bit concerning) .

But note: Canadian Solar may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.