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Did You Miss Akamai Technologies' (NASDAQ:AKAM) Impressive 110% Share Price Gain?

Simply Wall St
·3 min read

It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For instance the Akamai Technologies, Inc. (NASDAQ:AKAM) share price is 110% higher than it was three years ago. Most would be happy with that. In the last week shares have slid back 3.1%.

View our latest analysis for Akamai Technologies

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).

During three years of share price growth, Akamai Technologies achieved compound earnings per share growth of 25% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 28% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Au contraire, the share price change has arguably mimicked the EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

We know that Akamai Technologies has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Akamai Technologies provided a TSR of 19% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 8% over half a decade This suggests the company might be improving over 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. For example, we've discovered 2 warning signs for Akamai Technologies that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

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