Casella Waste Systems (NASDAQ:CWST) shareholders have earned a 27% CAGR over the last five years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Casella Waste Systems, Inc. (NASDAQ:CWST) stock is up an impressive 234% over the last five years. It's also up 8.5% in about a month. But the price may well have benefitted from a buoyant market, since stocks have gained 5.4% in the last thirty days.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Casella Waste Systems
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Casella Waste Systems moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Casella Waste Systems share price has gained 83% in three years. In the same period, EPS is up 15% per year. This EPS growth is lower than the 22% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Casella Waste Systems has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
Casella Waste Systems shareholders are down 9.2% over twelve months, which isn't far from the market return of -9.2%. The silver lining is that longer term investors would have made a total return of 27% per year over half a decade. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Casella Waste Systems , and understanding them should be part of your investment process.
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 American 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.
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