Newlat Food's (BIT:NWL) 19% CAGR outpaced the company's earnings growth over the same five-year period

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 when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Newlat Food S.p.A. (BIT:NWL) stock is up an impressive 143% over the last five years. In more good news, the share price has risen 14% in thirty days.

Since it's been a strong week for Newlat Food shareholders, let's have a look at trend of the longer term fundamentals.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Newlat Food achieved compound earnings per share (EPS) growth of 80% per year. This EPS growth is higher than the 19% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.45.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Newlat Food's earnings, revenue and cash flow.

A Different Perspective

We're pleased to report that Newlat Food shareholders have received a total shareholder return of 116% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Newlat Food better, we need to consider many other factors. Take risks, for example - Newlat Food has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

But note: Newlat Food may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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