The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is iRobot Corporation (NASDAQ:IRBT) which saw its share price drive 173% higher over five years. It's down 2.0% in the last seven days.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, iRobot achieved compound earnings per share (EPS) growth of 23% per year. This EPS growth is remarkably close to the 22% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on iRobot's earnings, revenue and cash flow 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 28% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 22% per year), it would seem that the stock's performance has improved in recent times. 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 iRobot better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for iRobot you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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