The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the Boot Barn Holdings, Inc. (NYSE:BOOT) share price is 283% higher than it was three years ago. How nice for those who held the stock! It’s also good to see the share price up 44% over the last quarter.
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. 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.
Boot Barn Holdings was able to grow its EPS at 45% per year over three years, sending the share price higher. In comparison, the 56% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Boot Barn Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on Boot Barn Holdings’s 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 Boot Barn Holdings shareholders have gained 73% (in total) over the last year. That’s better than the annualized TSR of 56% over the last three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Boot Barn Holdings it might be wise to click here to see if insiders have been buying or selling shares.
Of course Boot Barn 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 US exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.