Those who invested in SunPower (NASDAQ:SPWR) three years ago are up 380%
While SunPower Corporation (NASDAQ:SPWR) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 17% in the last quarter. In contrast, the return over three years has been impressive. In three years the stock price has launched 214% higher: a great result. So the recent fall in the share price should be viewed in that context. If the business can perform well for years to come, then the recent drop could be an opportunity.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for SunPower
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
SunPower was able to grow its EPS at 285% per year over three years, sending the share price higher. The average annual share price increase of 46% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how SunPower has grown profits over the years, but the future is more important for shareholders. This free interactive report on SunPower's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between SunPower's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. SunPower hasn't been paying dividends, but its TSR of 380% exceeds its share price return of 214%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While it's certainly disappointing to see that SunPower shares lost 8.9% throughout the year, that wasn't as bad as the market loss of 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. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for SunPower you should be aware of, and 1 of them doesn't sit too well with us.
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.
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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