Axcelis Technologies (NASDAQ:ACLS) stock performs better than its underlying earnings growth over last five years

For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the Axcelis Technologies, Inc. (NASDAQ:ACLS) share price. It's 642% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. In more good news, the share price has risen 36% in thirty days. We note that Axcelis Technologies reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report. Anyone who held for that rewarding ride would probably be keen to talk about it.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Axcelis Technologies

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 five years of share price growth, Axcelis Technologies achieved compound earnings per share (EPS) growth of 6.7% per year. This EPS growth is lower than the 49% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's nice to see that Axcelis Technologies shareholders have received a total shareholder return of 159% over the last year. That gain is better than the annual TSR over five years, which is 49%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Axcelis Technologies better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Axcelis Technologies , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.