Affiliated Managers Group's (NYSE:AMG) investors will be pleased with their impressive 127% return over the last five years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Affiliated Managers Group, Inc. (NYSE:AMG) share price has soared 126% in the last half decade. Most would be very happy with that. In the last week the share price is up 2.8%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Affiliated Managers Group

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. 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 the last half decade, Affiliated Managers Group became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Affiliated Managers Group share price is up 14% in the last three years. Meanwhile, EPS is up 15% per year. This EPS growth is higher than the 4% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.39.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Affiliated Managers Group's key metrics by checking this interactive graph of Affiliated Managers Group's earnings, revenue and cash flow.

A Different Perspective

Affiliated Managers Group provided a TSR of 24% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 18% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Affiliated Managers Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Affiliated Managers Group that you should be aware of before investing here.

Of course Affiliated Managers Group 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.