Investors in Akamai Technologies (NASDAQ:AKAM) have made a decent return of 98% over the past five years
Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Akamai Technologies, Inc. (NASDAQ:AKAM) share price is 98% higher than it was five years ago, which is more than the market average. It's also good to see that the stock is up 15% in a year.
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.
See our latest analysis for Akamai Technologies
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, Akamai Technologies managed to grow its earnings per share at 17% a year. So the EPS growth rate is rather close to the annualized share price gain of 15% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Akamai Technologies has grown profits over the years, but the future is more important for shareholders. This free interactive report on Akamai Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Akamai Technologies has rewarded shareholders with a total shareholder return of 15% in the last twelve months. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. 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 Akamai Technologies better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Akamai Technologies you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
