If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the NetScout Systems, Inc. (NASDAQ:NTCT) share price is up 26% in the last five years, that's less than the market return. Over the last twelve months the stock price has risen a very respectable 18%.
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, NetScout Systems moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that NetScout Systems 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
NetScout Systems shareholders gained a total return of 18% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 5% per year over five year. This suggests the company might be improving over time. You could get a better understanding of NetScout Systems' growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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.
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.
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