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II-VI's (NASDAQ:IIVI) Wonderful 342% Share Price Increase Shows How Capitalism Can Build Wealth

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Simply Wall St
·3 min read
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Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the II-VI Incorporated (NASDAQ:IIVI) share price. It's 342% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 56% gain in the last three months.

See our latest analysis for II-VI

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, II-VI actually saw its EPS drop 24% per year. This was, in part, due to extraordinary items impacting earning in the last twelve months.

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, II-VI's revenue is growing nicely, at a compound rate of 24% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

II-VI is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for II-VI in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that II-VI shareholders have received a total shareholder return of 151% over one year. That gain is better than the annual TSR over five years, which is 35%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand II-VI better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with II-VI (including 1 which shouldn't be ignored) .

We will like II-VI better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.