Shareholders Are Raving About How The FormFactor (NASDAQ:FORM) Share Price Increased 461%

Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. For example, the FormFactor, Inc. (NASDAQ:FORM) share price is up a whopping 461% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. Unfortunately, though, the stock has dropped 5.4% over a week. But this could be related to the soft market, with stocks selling off around 0.4% in the last week.

Check out our latest analysis for FormFactor

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 last half decade, FormFactor became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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 FormFactor share price has gained 178% in three years. In the same period, EPS is up 22% per year. Notably, the EPS growth has been slower than the annualised share price gain of 41% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

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

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

We're pleased to report that FormFactor shareholders have received a total shareholder return of 92% over one year. That gain is better than the annual TSR over five years, which is 41%. 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. 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. For example, we've discovered 2 warning signs for FormFactor that you should be aware of before investing here.

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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