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Kornit Digital's (NASDAQ:KRNT) earnings growth rate lags the 49% CAGR delivered to shareholders

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Kornit Digital Ltd. (NASDAQ:KRNT) shareholders might be concerned after seeing the share price drop 16% in the last week. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 627%. Impressive! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. Anyone who held for that rewarding ride would probably be keen to talk about it.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Kornit Digital

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years of share price growth, Kornit Digital 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.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Kornit Digital's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Kornit Digital shareholders have received a total shareholder return of 44% over one year. However, the TSR over five years, coming in at 49% per year, is even more impressive. 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. For instance, we've identified 2 warning signs for Kornit Digital that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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.