CEVA, Inc. (NASDAQ:CEVA) shareholders might be concerned after seeing the share price drop 20% in the last quarter. But the silver lining is the stock is up over five years. In that time, it is up 81%, which isn't bad, but is below the market return of 128%.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
CEVA's earnings per share are down 57% per year, despite strong share price performance over five years. This was, in part, due to extraordinary items impacting earning in the last twelve months.
Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
In contrast revenue growth of 7.6% per year is probably viewed as evidence that CEVA is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on CEVA's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
CEVA shareholders are up 30% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 13% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand CEVA better, we need to consider many other factors. Take risks, for example - CEVA has 3 warning signs we think you should be aware of.
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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