Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Water Intelligence plc (LON:WATR) shares for the last five years, while they gained 953%. If that doesn't get you thinking about long term investing, we don't know what will. It's also up 21% in about a month.
It really delights us to see such great share price performance for investors.
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 five years of share price growth, Water Intelligence achieved compound earnings per share (EPS) growth of 19% per year. This EPS growth is slower than the share price growth of 60% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 59.32.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Water Intelligence has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Water Intelligence's financial health with this free report on its balance sheet.
A Different Perspective
It's good to see that Water Intelligence has rewarded shareholders with a total shareholder return of 118% in the last twelve months. That's better than the annualised return of 60% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Water Intelligence , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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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. 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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Water Intelligence plc provides leak detection and remediation services for potable and non-potable water in the United States, the United Kingdom, Australia, Canada, and internationally.
Excellent balance sheet with questionable track record.