U.S. markets close in 3 hours 18 minutes

  • S&P 500

    4,331.17
    +11.11 (+0.26%)
     

  • Dow 30

    33,972.28
    +8.44 (+0.02%)
     

  • Nasdaq

    13,252.72
    +40.91 (+0.31%)
     

  • Russell 2000

    1,787.05
    +10.54 (+0.59%)
     

  • Crude Oil

    90.05
    +0.02 (+0.02%)
     

  • Gold

    1,935.60
    -10.00 (-0.51%)
     

  • Silver

    23.38
    -0.47 (-1.97%)
     

  • EUR/USD

    1.0594
    -0.0053 (-0.50%)
     

  • 10-Yr Bond

    4.5230
    +0.0850 (+1.92%)
     

  • GBP/USD

    1.2213
    -0.0027 (-0.22%)
     

  • USD/JPY

    148.8220
    +0.4620 (+0.31%)
     

  • Bitcoin USD

    26,356.00
    -217.69 (-0.82%)
     

  • CMC Crypto 200

    563.77
    +4.26 (+0.76%)
     

  • FTSE 100

    7,623.99
    -59.92 (-0.78%)
     

  • Nikkei 225

    32,678.62
    +276.21 (+0.85%)
     

Lam Research's (NASDAQ:LRCX) 27% CAGR outpaced the company's earnings growth over the same five-year period

Simply Wall St
·3 min read

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Lam Research Corporation (NASDAQ:LRCX) shareholders would be well aware of this, since the stock is up 211% in five years. Also pleasing for shareholders was the 28% gain in the last three months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Lam Research

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.

Over half a decade, Lam Research managed to grow its earnings per share at 26% a year. That makes the EPS growth particularly close to the yearly share price growth of 25%. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.

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

It is of course excellent to see how Lam Research has grown profits over the years, but the future is more important for shareholders. This free interactive report on Lam Research's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Lam Research the TSR over the last 5 years was 237%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Lam Research shareholders have received a total shareholder return of 23% over the last year. That's including the dividend. However, that falls short of the 27% TSR per annum it has made for shareholders, each year, over five years. Before spending more time on Lam Research it might be wise to click here to see if insiders have been buying or selling shares.

We will like Lam Research better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here