The total return for O'Reilly Automotive (NASDAQ:ORLY) investors has risen faster than earnings growth over the last five years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of O'Reilly Automotive, Inc. (NASDAQ:ORLY) stock is up an impressive 169% over the last five years. On the other hand, the stock price has retraced 3.1% in the last week. But this could be related to the soft market, with stocks selling off around 1.9% in the last week.
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.
View our latest analysis for O'Reilly Automotive
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
During five years of share price growth, O'Reilly Automotive achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is reasonably close to the 22% 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.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that O'Reilly Automotive has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It's good to see that O'Reilly Automotive has rewarded shareholders with a total shareholder return of 35% in the last twelve months. That's better than the annualised return of 22% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for O'Reilly Automotive (of which 1 makes us a bit uncomfortable!) you should know about.
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.
