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Is Tactile Systems Technology's (NASDAQ:TCMD) 117% Share Price Increase Well Justified?

Simply Wall St

While Tactile Systems Technology, Inc. (NASDAQ:TCMD) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 27% in the last quarter. But in three years the returns have been great. The share price marched upwards over that time, and is now 117% higher than it was. It's not uncommon to see a share price retrace a bit, after a big gain. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

See our latest analysis for Tactile Systems Technology

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.

Tactile Systems Technology was able to grow its EPS at 93% per year over three years, sending the share price higher. This EPS growth is higher than the 30% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. Of course, with a P/E ratio of 92.22, the market remains optimistic.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NasdaqGM:TCMD Past and Future Earnings, October 2nd 2019

We know that Tactile Systems Technology has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Over the last year, Tactile Systems Technology shareholders took a loss of 37%. In contrast the market gained about 1.2%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Investors are up over three years, booking 30% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. Before spending more time on Tactile Systems Technology it might be wise to click here to see if insiders have been buying or selling shares.

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 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.