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We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) shares for the last five years, while they gained 370%. If that doesn't get you thinking about long term investing, we don't know what will. In the last week the share price is up 1.4%.
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.
Over half a decade, Ollie's Bargain Outlet Holdings managed to grow its earnings per share at 42% a year. So the EPS growth rate is rather close to the annualized share price gain of 36% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Ollie's Bargain Outlet Holdings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Ollie's Bargain Outlet Holdings' financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Ollie's Bargain Outlet Holdings has rewarded shareholders with a total shareholder return of 66% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 36% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Ollie's Bargain Outlet Holdings (of which 1 can't be ignored!) you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are 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.
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