Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Malibu Boats, Inc. (NASDAQ:MBUU) share price is up 77% in the last 5 years, clearly besting the market return of around 37% (ignoring dividends).
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Malibu Boats achieved compound earnings per share (EPS) growth of 37% per year. This EPS growth is higher than the 12% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.24.
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 Malibu Boats has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Malibu Boats stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Although it hurts that Malibu Boats returned a loss of 2.3% in the last twelve months, the broader market was actually worse, returning a loss of 7.9%. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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 Malibu Boats 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 US exchanges.
What are the risks and opportunities for Malibu Boats?
Trading at 63% below our estimate of its fair value
Earnings are forecast to grow 6.63% per year
Earnings grew by 43.1% over the past year
No risks detected for MBUU from our risks checks.
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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.