The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. For example, the Electronic Arts Inc. (NASDAQ:EA) share price has soared 124% in the last half decade. Most would be very happy with that.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Electronic Arts managed to grow its earnings per share at 48% a year. This EPS growth is higher than the 18% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.60 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Electronic Arts has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
Electronic Arts provided a TSR of 13% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 18% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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 email@example.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.