Axcelis Technologies' (NASDAQ:ACLS) earnings growth rate lags the 23% CAGR delivered to shareholders

It hasn't been the best quarter for Axcelis Technologies, Inc. (NASDAQ:ACLS) shareholders, since the share price has fallen 25% in that time. But that scarcely detracts from the really solid long term returns generated by the company over five years. Indeed, the share price is up an impressive 182% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Only time will tell if there is still too much optimism currently reflected in the share price. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 48% drop, in the last year.

In light of the stock dropping 3.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Axcelis Technologies

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

During five years of share price growth, Axcelis Technologies achieved compound earnings per share (EPS) growth of 70% per year. This EPS growth is higher than the 23% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.16.

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Axcelis Technologies' earnings, revenue and cash flow.

A Different Perspective

Investors in Axcelis Technologies had a tough year, with a total loss of 48%, against a market gain of about 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 23% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Axcelis Technologies you should know about.

Axcelis Technologies is not the only stock that insiders are buying. For those who like to find lesser know companies 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 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.