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Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the The a2 Milk Company Limited (NZSE:ATM) share price is up a whopping 1977% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. Meanwhile the share price is 3.7% higher than it was a week ago.
Anyone who held for that rewarding ride would probably be keen to talk about it.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Over half a decade, a2 Milk managed to grow its earnings per share at 118% a year. The EPS growth is more impressive than the yearly share price gain of 83% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
We know that a2 Milk has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on a2 Milk’s balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It’s good to see that a2 Milk has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Having said that, the five-year TSR of 83% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.