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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Silicon Laboratories Inc. (NASDAQ:SLAB) share price has soared 115% in the last three years. Most would be happy with that. It's also good to see the share price up 24% over the last quarter.
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 three years of share price growth, Silicon Laboratories achieved compound earnings per share growth of 28% per year. Notably, the 29% average annual share price gain matches up nicely with the EPS growth rate. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Silicon Laboratories's earnings, revenue and cash flow.
A Different Perspective
Silicon Laboratories shareholders are up 3.8% for the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before spending more time on Silicon Laboratories 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 email@example.com. 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.