For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Fair Isaac Corporation (NYSE:FICO) shares for the last five years, while they gained 383%. And this is just one example of the epic gains achieved by some long term investors. Also pleasing for shareholders was the 30% gain in the last three months. But this could be related to the strong market, which is up 16% in the last three months.
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 five years of share price growth, Fair Isaac achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is slower than the share price growth of 37% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 54.86.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Fair Isaac's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Fair Isaac has rewarded shareholders with a total shareholder return of 22% in the last twelve months. However, that falls short of the 37% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Fair Isaac better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Fair Isaac you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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