We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Envela Corporation (NYSEMKT:ELA) shares for the last five years, while they gained 878%. This just goes to show the value creation that some businesses can achieve. It's down 3.1% in the last seven days.
It really delights us to see such great share price performance for investors.
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. 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, Envela moved from a loss to profitability. 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. Indeed, the Envela share price has gained 525% in three years. Meanwhile, EPS is up 51% per year. Notably, the EPS growth has been slower than the annualised share price gain of 84% over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Envela has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
We're pleased to report that Envela shareholders have received a total shareholder return of 100% over one year. That gain is better than the annual TSR over five years, which is 58%. Therefore it seems like sentiment around the company has been positive lately. 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 Envela better, we need to consider many other factors. Take risks, for example - Envela has 3 warning signs (and 1 which can't be ignored) we think you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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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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. 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.
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