It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. To wit, the Keysight Technologies, Inc. (NYSE:KEYS) share price has flown 228% in the last three years. How nice for those who held the stock! It's also good to see the share price up 29% over the last quarter.
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 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 three years of share price growth, Keysight Technologies actually saw its earnings per share (EPS) drop 31% per year. This means it's unlikely the market is judging the company based on earnings growth. Therefore, we think it's worth considering other metrics as well.
It could be that the revenue growth of 12% per year is viewed as evidence that Keysight Technologies is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We know that Keysight Technologies has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Keysight Technologies will earn in the future (free profit forecasts)
A Different Perspective
We're pleased to report that Keysight Technologies rewarded shareholders with a total shareholder return of 68% over the last year. That's better than the annualized TSR of 49% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. If you would like to research Keysight Technologies in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Keysight Technologies 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.
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 firstname.lastname@example.org. 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.