Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Copart, Inc. (NASDAQ:CPRT) shares for the last five years, while they gained 595%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 25% over the last quarter.
Anyone who held for that rewarding ride would probably be keen to talk about it.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Copart managed to grow its earnings per share at 28% a year. This EPS growth is lower than the 47% average annual increase in the share price. 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 company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Copart has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Copart will grow revenue in the future.
A Different Perspective
It's nice to see that Copart shareholders have received a total shareholder return of 52% over the last year. That gain is better than the annual TSR over five years, which is 47%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Copart , and understanding them should be part of your investment process.
Of course Copart may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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