Urban Outfitters' (NASDAQ:URBN) 25% CAGR outpaced the company's earnings growth over the same five-year period

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Urban Outfitters, Inc. (NASDAQ:URBN) which saw its share price drive 205% higher over five years. It's also up 22% in about a month. But this could be related to good market conditions -- stocks in its market are up 9.9% in the last month.

The past week has proven to be lucrative for Urban Outfitters investors, so let's see if fundamentals drove the company's five-year performance.

We've discovered 1 warning sign about Urban Outfitters. View them for free.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Urban Outfitters managed to grow its earnings per share at 21% a year. So the EPS growth rate is rather close to the annualized share price gain of 25% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Urban Outfitters' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Urban Outfitters shareholders have received a total shareholder return of 38% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 25% per year), it would seem that the stock's performance has improved in recent times. 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 Urban Outfitters better, we need to consider many other factors. For instance, we've identified 1 warning sign for Urban Outfitters that you should be aware of.

But note: Urban Outfitters may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.