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Did The Underlying Business Drive Advanced Micro Devices's (NASDAQ:AMD) Lovely 600% Share Price Gain?

Simply Wall St

The Advanced Micro Devices, Inc. (NASDAQ:AMD) share price has had a bad week, falling 13%. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 600% in that time. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Anyone who held for that rewarding ride would probably be keen to talk about it.

Check out our latest analysis for Advanced Micro Devices

Given that Advanced Micro Devices only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last 5 years Advanced Micro Devices saw its revenue grow at 4.7% per year. Put simply, that growth rate fails to impress. So shareholders should be pretty elated with the 48% increase per year, in that time. We don't think the growth over the period is that great, but it could be that faster growth appears to some to be on the horizon. Having said that, a closer look at the numbers might surface good reasons to believe that profits will gush in the future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

NasdaqGS:AMD Income Statement, August 16th 2019

Advanced Micro Devices is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Advanced Micro Devices stock, you should check out this free report showing analyst consensus estimates for future profits.

A Different Perspective

It's good to see that Advanced Micro Devices has rewarded shareholders with a total shareholder return of 53% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 48% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

We will like Advanced Micro Devices better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.