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For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Copart, Inc. (NASDAQ:CPRT) share price. It's 484% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. We note the stock price is up 3.8% in the last seven days.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Copart managed to grow its earnings per share at 27% a year. This EPS growth is slower than the share price growth of 42% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Copart has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
Copart provided a TSR of 37% over the year. That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 42% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. 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. Take risks, for example - Copart has 1 warning sign we think you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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. 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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