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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Nomad Foods Limited (NYSE:NOMD) share price has soared 145% in the last three years. Most would be happy with that. It's also good to see the share price up 12% over the last quarter. But this could be related to the strong market, which is up 6.0% in the last three months.
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.
Nomad Foods became profitable within the last three years. 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).
It is of course excellent to see how Nomad Foods has grown profits over the years, but the future is more important for shareholders. This free interactive report on Nomad Foods's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Nomad Foods shareholders have gained 20% (in total) over the last year. But the three year TSR of 35% per year is even better. Before forming an opinion on Nomad Foods you might want to consider these 3 valuation metrics.
But note: Nomad Foods may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.