Despite shrinking by US$17b in the past week, PDD Holdings (NASDAQ:PDD) shareholders are still up 557% over 5 years

PDD Holdings Inc. (NASDAQ:PDD) shareholders have seen the share price descend 12% over the month. But that doesn't undermine the fantastic longer term performance (measured over five years). To be precise, the stock price is 557% higher than it was five years ago, a wonderful performance by any measure. So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. We love happy stories like this one. The company should be really proud of that performance!

Since the long term performance has been good but there's been a recent pullback of 8.5%, let's check if the fundamentals match the share price.

See our latest analysis for PDD Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the five years of share price growth, PDD Holdings moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how PDD Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on PDD Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's nice to see that PDD Holdings shareholders have received a total shareholder return of 91% over the last year. That's better than the annualised return of 46% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand PDD Holdings better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for PDD Holdings you should be aware of.

We will like PDD Holdings better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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