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It hasn't been the best quarter for Semtech Corporation (NASDAQ:SMTC) shareholders, since the share price has fallen 18% in that time. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 189% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Semtech achieved compound earnings per share (EPS) growth of 39% per year. The EPS growth is more impressive than the yearly share price gain of 24% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. Of course, with a P/E ratio of 66.91, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Semtech has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Semtech will grow revenue in the future.
A Different Perspective
Semtech shareholders are up 35% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 24% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Semtech that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.
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