Micron Technology's (NASDAQ:MU) 6.4% CAGR outpaced the company's earnings growth over the same five-year period

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But Micron Technology, Inc. (NASDAQ:MU) has fallen short of that second goal, with a share price rise of 35% over five years, which is below the market return. The last year has been disappointing, with the stock price down 18% in that time.

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

View our latest analysis for Micron Technology

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, Micron Technology achieved compound earnings per share (EPS) growth of 11% per year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.04 also suggests market apprehension.

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

We know that Micron Technology has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

Although it hurts that Micron Technology returned a loss of 18% in the last twelve months, the broader market was actually worse, returning a loss of 23%. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Micron Technology , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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. 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.