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Is eGain's (NASDAQ:EGAN) 166% Share Price Increase Well Justified?

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It hasn't been the best quarter for eGain Corporation (NASDAQ:EGAN) shareholders, since the share price has fallen 20% in that time. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 166% higher today. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Check out our latest analysis for eGain

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, eGain moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

eGain shareholders gained a total return of 22% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 22% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand eGain better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for eGain (of which 1 is a bit concerning!) you should know about.

But note: eGain may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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 (at) simplywallst.com.