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First Solar, Inc. (NASDAQ:FSLR) shareholders might be concerned after seeing the share price drop 16% in the last month. But that doesn't change the fact that the returns over the last five years have been respectable. The share price is up 75%, which is better than the market return of 74%.
Since the stock has added US$540m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years of share price growth, First Solar moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that First Solar has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at First Solar's financial health with this free report on its balance sheet.
A Different Perspective
We regret to report that First Solar shareholders are down 13% for the year. Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand First Solar better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with First Solar , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.