Synopsys (NASDAQ:SNPS) shareholders have earned a 29% CAGR over the last five years
When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Synopsys, Inc. (NASDAQ:SNPS) share price has soared 258% in the last half decade. Most would be very happy with that. On top of that, the share price is up 14% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 8.6% in 90 days).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Synopsys
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, Synopsys achieved compound earnings per share (EPS) growth of 48% per year. This EPS growth is higher than the 29% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. Of course, with a P/E ratio of 51.54, the market remains optimistic.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Synopsys has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Synopsys will grow revenue in the future.
A Different Perspective
It's nice to see that Synopsys shareholders have received a total shareholder return of 2.1% over the last year. Having said that, the five-year TSR of 29% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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