Silicom (NASDAQ:SILC) shareholders have earned a 10% CAGR over the last three years
Silicom Ltd. (NASDAQ:SILC) shareholders might be concerned after seeing the share price drop 12% in the last quarter. In contrast the stock is up over the last three years. In that time, it is up 34%, which isn't bad, but not amazing either.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Silicom
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 three years of share price growth, Silicom achieved compound earnings per share growth of 26% per year. The average annual share price increase of 10% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Silicom has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Silicom will grow revenue in the future.
A Different Perspective
While it's never nice to take a loss, Silicom shareholders can take comfort that their trailing twelve month loss of 4.9% wasn't as bad as the market loss of around 13%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.2% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 2 warning signs we've spotted with Silicom .
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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