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SPS Commerce's (NASDAQ:SPSC) earnings growth rate lags the 32% CAGR delivered to shareholders

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the SPS Commerce, Inc. (NASDAQ:SPSC) share price is up a whopping 302% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. On the other hand, we note it's down 9.8% in about a month. We note that the broader market is down 6.3% in the last month, and this may have impacted SPS Commerce's share price.

Since the long term performance has been good but there's been a recent pullback of 3.1%, let's check if the fundamentals match the share price.

Check out our latest analysis for SPS Commerce

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).

Over half a decade, SPS Commerce managed to grow its earnings per share at 37% a year. This EPS growth is reasonably close to the 32% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

Dive deeper into SPS Commerce's key metrics by checking this interactive graph of SPS Commerce's earnings, revenue and cash flow.

A Different Perspective

While it's never nice to take a loss, SPS Commerce shareholders can take comfort that their trailing twelve month loss of 12% wasn't as bad as the market loss of around 19%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 32% 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. Before forming an opinion on SPS Commerce you might want to consider these 3 valuation metrics.

We will like SPS Commerce better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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