OSI Systems (NASDAQ:OSIS) sheds 3.2% this week, as yearly returns fall more in line with earnings growth
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at OSI Systems, Inc. (NASDAQ:OSIS), which is up 66%, over three years, soundly beating the market return of 34% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 22%.
Although OSI Systems has shed US$65m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for OSI Systems
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 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).
OSI Systems was able to grow its EPS at 5.1% per year over three years, sending the share price higher. In comparison, the 18% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into OSI Systems' key metrics by checking this interactive graph of OSI Systems's earnings, revenue and cash flow.
A Different Perspective
It's good to see that OSI Systems has rewarded shareholders with a total shareholder return of 22% in the last twelve months. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand OSI Systems better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for OSI Systems you should know about.
But note: OSI Systems 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 American exchanges.
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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.
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