Investing in Builders FirstSource (NYSE:BLDR) five years ago would have delivered you a 796% gain

Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Builders FirstSource, Inc. (NYSE:BLDR) shares for the last five years, while they gained 796%. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 19% over the last quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. We love happy stories like this one. The company should be really proud of that performance!

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Builders FirstSource

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Builders FirstSource achieved compound earnings per share (EPS) growth of 44% per year. This EPS growth is slower than the share price growth of 55% 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.

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

This free interactive report on Builders FirstSource's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Builders FirstSource shareholders gained a total return of 17% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 55% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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. For instance, we've identified 2 warning signs for Builders FirstSource that you should be aware of.

Of course Builders FirstSource 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 American 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.