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Investing in TechTarget (NASDAQ:TTGT) five years ago would have delivered you a 442% gain

TechTarget, Inc. (NASDAQ:TTGT) shareholders have seen the share price descend 13% over the month. But that doesn't undermine the fantastic longer term performance (measured over five years). In that time, the share price has soared some 442% higher! So it might be that some shareholders are taking profits after good performance. Only time will tell if there is still too much optimism currently reflected in the share price. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 29% drop, in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for TechTarget

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, TechTarget achieved compound earnings per share (EPS) growth of 55% per year. This EPS growth is higher than the 40% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Of course, with a P/E ratio of 135.32, the market remains optimistic.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

A Different Perspective

We regret to report that TechTarget shareholders are down 29% for the year. Unfortunately, that's worse than the broader market decline of 16%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 40% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that TechTarget is showing 2 warning signs in our investment analysis , you should know about...

Of course TechTarget 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 US 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.

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