Generac Holdings' (NYSE:GNRC) investors will be pleased with their stellar 136% return over the last five years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Generac Holdings Inc. (NYSE:GNRC) stock is up an impressive 136% over the last five years. In more good news, the share price has risen 17% in thirty days.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Generac Holdings
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 five years of share price growth, Generac Holdings actually saw its EPS drop 6.7% per year.
Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
On the other hand, Generac Holdings' revenue is growing nicely, at a compound rate of 19% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Generac Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
It's good to see that Generac Holdings has rewarded shareholders with a total shareholder return of 27% in the last twelve months. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Generac Holdings has 2 warning signs (and 1 which is significant) we think you should know about.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
