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The Mercury Systems (NASDAQ:MRCY) Share Price Has Soared 391%, Delighting Many Shareholders

Simply Wall St
·3 mins read

It hasn't been the best quarter for Mercury Systems, Inc. (NASDAQ:MRCY) shareholders, since the share price has fallen 14% in that time. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 391% in that time. 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.

See our latest analysis for Mercury Systems

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Mercury Systems achieved compound earnings per share (EPS) growth of 28% per year. This EPS growth is lower than the 37% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 49.40.

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

We know that Mercury Systems has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Mercury Systems stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

While the broader market gained around 25% in the last year, Mercury Systems shareholders lost 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 37% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Mercury Systems better, we need to consider many other factors. For instance, we've identified 1 warning sign for Mercury Systems that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.