By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Gentherm Incorporated (NASDAQ:THRM), which is up 98%, over three years, soundly beating the market return of 49% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 71%.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
Gentherm was able to grow its EPS at 58% per year over three years, sending the share price higher. The average annual share price increase of 26% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
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 Gentherm has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
We're pleased to report that Gentherm 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 14%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Gentherm better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Gentherm you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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