FormFactor's (NASDAQ:FORM) five-year earnings growth trails the stellar shareholder returns

FormFactor, Inc. (NASDAQ:FORM) shareholders might be concerned after seeing the share price drop 25% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 124% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.

The past week has proven to be lucrative for FormFactor investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for FormFactor

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.

During the five years of share price growth, FormFactor moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that FormFactor has improved its bottom line lately, but is it going to grow revenue? Check if analysts think FormFactor will grow revenue in the future.

A Different Perspective

FormFactor shareholders have received returns of 35% over twelve months, which isn't far from the general market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 18%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. To that end, you should be aware of the 2 warning signs we've spotted with FormFactor .

If you are like me, then you will not want to miss this free list of undervalued small caps 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.

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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.