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Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the PTC Inc. (NASDAQ:PTC) share price. It's 347% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 21% over the last quarter.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the last half decade, PTC became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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 PTC share price has gained 81% in three years. During the same period, EPS grew by 59% each year. This EPS growth is higher than the 22% 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. Of course, with a P/E ratio of 140.92, the market remains optimistic.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that PTC has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
It's good to see that PTC has rewarded shareholders with a total shareholder return of 143% in the last twelve months. That's better than the annualised return of 35% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for PTC you should know about.
Of course PTC 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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