Futu Holdings' (NASDAQ:FUTU) earnings growth rate lags the 40% CAGR delivered to shareholders

It might be of some concern to shareholders to see the Futu Holdings Limited (NASDAQ:FUTU) share price down 12% in the last month. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 438% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. Unfortunately not all shareholders will have held it for five years, so spare a thought for those caught in the 45% decline over the last three years: that's a long time to wait for profits.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

See our latest analysis for Futu Holdings

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...' 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.

Over half a decade, Futu Holdings managed to grow its earnings per share at 89% a year. The EPS growth is more impressive than the yearly share price gain of 40% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

We know that Futu Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Futu Holdings shareholders are up 15% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 40% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on Futu Holdings you might want to consider these 3 valuation metrics.

Of course Futu Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com