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Is Smith Micro Software's (NASDAQ:SMSI) 154% Share Price Increase Well Justified?

Simply Wall St

Smith Micro Software, Inc. (NASDAQ:SMSI) shareholders might be concerned after seeing the share price drop 11% in the last month. But that doesn't change the fact that the returns over the last three years have been very strong. In fact, the share price is up a full 154% compared to three years ago. So the recent fall in the share price should be viewed in that context. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

Check out our latest analysis for Smith Micro Software

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Smith Micro Software became profitable within the last three years. Given the importance of this milestone, it's not overly surprising that the share price has increased strongly.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NasdaqCM:SMSI Past and Future Earnings, October 9th 2019

It is of course excellent to see how Smith Micro Software has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Smith Micro Software stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Smith Micro Software shareholders have received a total shareholder return of 127% over the last year. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

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 editorial-team@simplywallst.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.