The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For instance the TopBuild Corp. (NYSE:BLD) share price is 183% higher than it was three years ago. How nice for those who held the stock! It’s also good to see the share price up 19% over the last quarter.
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. 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.
During three years of share price growth, TopBuild achieved compound earnings per share growth of 22% per year. In comparison, the 41% per year gain in the share price outpaces the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it did three years ago. That’s not necessarily surprising considering the three-year track record of earnings growth.
The company’s earnings per share (over time) are depicted in the image below.
Dive deeper into TopBuild’s key metrics by checking this interactive graph of TopBuild’s earnings, revenue and cash flow.
A Different Perspective
We’re pleased to report that TopBuild rewarded shareholders with a total shareholder return of 65% over the last year. That gain actually surpasses the 41% TSR it generated (per year) over three years. Given the track record of solid returns over varying time frames, it might be worth putting TopBuild on your watchlist. Before spending more time on TopBuild it might be wise to click here to see if insiders have been buying or selling shares.
We will like TopBuild 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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If you spot an error that warrants correction, please contact the editor at email@example.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.