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Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the Sleep Number Corporation (NASDAQ:SNBR) share price is up a whopping 533% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 48% over the last quarter.
It really delights us to see such great share price performance for investors.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Sleep Number achieved compound earnings per share (EPS) growth of 39% per year. So the EPS growth rate is rather close to the annualized share price gain of 45% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
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 Sleep Number has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Sleep Number's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that Sleep Number shareholders have received a total shareholder return of 396% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 45% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. To that end, you should learn about the 4 warning signs we've spotted with Sleep Number (including 1 which is significant) .
Of course Sleep Number may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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