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It hasn't been the best quarter for iRobot Corporation (NASDAQ:IRBT) shareholders, since the share price has fallen 23% in that time. But in three years the returns have been great. The share price marched upwards over that time, and is now 164% higher than it was. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
During three years of share price growth, iRobot achieved compound earnings per share growth of 30% per year. In comparison, the 38% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.
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 iRobot has grown profits over the years, but the future is more important for shareholders. This free interactive report on iRobot's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that iRobot shareholders have received a total shareholder return of 21% over the last year. That gain is better than the annual TSR over five years, which is 17%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before spending more time on iRobot it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.