The five-year decline in earnings for eDreams ODIGEO BME:EDR) isn't encouraging, but shareholders are still up 322% over that period

We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. To wit, the eDreams ODIGEO S.A. (BME:EDR) share price has soared 322% over five years. And this is just one example of the epic gains achieved by some long term investors. It's down 6.9% in the last seven days.

Although eDreams ODIGEO has shed €67m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 the last half decade, eDreams ODIGEO became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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 eDreams ODIGEO has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

eDreams ODIGEO shareholders are up 13% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 33% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - eDreams ODIGEO has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

Of course eDreams ODIGEO 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 Spanish 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.