Investors in SPS Commerce (NASDAQ:SPSC) have seen fantastic returns of 316% over the past five years
Buying shares in the best businesses can build meaningful wealth for you and your family. 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 SPS Commerce, Inc. (NASDAQ:SPSC) shares for the last five years, while they gained 316%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 16% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 14% in 90 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.
See our latest analysis for SPS Commerce
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, SPS Commerce achieved compound earnings per share (EPS) growth of 43% per year. This EPS growth is higher than the 33% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Having said that, the market is still optimistic, given the P/E ratio of 108.19.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that SPS Commerce has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that SPS Commerce shareholders have received a total shareholder return of 36% over one year. That gain is better than the annual TSR over five years, which is 33%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
