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 on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Zebra Technologies Corporation (NASDAQ:ZBRA) which saw its share price drive 237% higher over five years. It's also up 19% in about a month. But this could be related to good market conditions -- stocks in its market are up 13% in the last month.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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.
During the last half decade, Zebra Technologies became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Zebra Technologies share price is up 70% in the last three years. In the same period, EPS is up 2.3% per year. Notably, the EPS growth has been slower than the annualised share price gain of 19% over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Zebra Technologies' key metrics by checking this interactive graph of Zebra Technologies's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 8.8% in the twelve months, Zebra Technologies shareholders did even worse, losing 39%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 27% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Zebra Technologies better, we need to consider many other factors. Even so, be aware that Zebra Technologies is showing 4 warning signs in our investment analysis , you should know about...
We will like Zebra Technologies better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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