Did You Miss Builders FirstSource's (NASDAQ:BLDR) Impressive 254% Share Price Gain?
It might be of some concern to shareholders to see the Builders FirstSource, Inc. (NASDAQ:BLDR) share price down 12% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. It's fair to say most would be happy with 254% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today.
See our latest analysis for Builders FirstSource
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the five years of share price growth, Builders FirstSource 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 Builders FirstSource share price has gained 117% in three years. During the same period, EPS grew by 88% each year. This EPS growth is higher than the 29% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Builders FirstSource has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Builders FirstSource's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Builders FirstSource has rewarded shareholders with a total shareholder return of 91% in the last twelve months. That's better than the annualised return of 29% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Builders FirstSource better, we need to consider many other factors. For example, we've discovered 2 warning signs for Builders FirstSource (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
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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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