The total return for Super Micro Computer (NASDAQ:SMCI) investors has risen faster than earnings growth over the last three years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Super Micro Computer, Inc. (NASDAQ:SMCI) share price has soared 197% in the last three years. How nice for those who held the stock! On top of that, the share price is up 25% in about a quarter.
Since the long term performance has been good but there's been a recent pullback of 4.7%, let's check if the fundamentals match the share price.
See our latest analysis for Super Micro Computer
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Super Micro Computer was able to grow its EPS at 22% per year over three years, sending the share price higher. This EPS growth is lower than the 44% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Super Micro Computer 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 Super Micro Computer has rewarded shareholders with a total shareholder return of 39% in the last twelve months. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Super Micro Computer (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
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.
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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.
