Investing in Lifeway Foods (NASDAQ:LWAY) five years ago would have delivered you a 398% gain
We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held Lifeway Foods, Inc. (NASDAQ:LWAY) shares for the last five years, while they gained 398%. If that doesn't get you thinking about long term investing, we don't know what will. In more good news, the share price has risen 33% in thirty days.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Lifeway Foods
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Lifeway Foods moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Lifeway Foods share price is up 105% in the last three years. Meanwhile, EPS is up 29% per year. This EPS growth is reasonably close to the 27% average annual increase in the share price (over three years, again). So you could reasonably conclude that investor sentiment towards the stock has remained pretty steady, over time. Arguably the share price is reflecting the earnings per share.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Lifeway Foods has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
A Different Perspective
It's nice to see that Lifeway Foods shareholders have received a total shareholder return of 99% over the last year. That's better than the annualised return of 38% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Lifeway Foods has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course Lifeway Foods may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
