Nova's (NASDAQ:NVMI) five-year total shareholder returns outpace the underlying earnings growth

It might be of some concern to shareholders to see the Nova Ltd. (NASDAQ:NVMI) share price down 13% in the last month. But over five years returns have been remarkably great. To be precise, the stock price is 466% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price.

Since the long term performance has been good but there's been a recent pullback of 6.2%, let's check if the fundamentals match the share price.

View our latest analysis for Nova

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 five years of share price growth, Nova achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is lower than the 41% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Nova has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Nova stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that Nova shareholders have received a total shareholder return of 71% over one year. That gain is better than the annual TSR over five years, which is 41%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Nova you might want to consider these 3 valuation metrics.

Of course Nova may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.