Photronics' (NASDAQ:PLAB) five-year total shareholder returns outpace the underlying earnings growth

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Photronics, Inc. (NASDAQ:PLAB) share price has soared 108% in the last half decade. Most would be very happy with that. On the other hand, the stock price has retraced 7.2% in the last week. But note that the broader market is down 2.1% since last week, and this may have impacted Photronics' share price.

Since the long term performance has been good but there's been a recent pullback of 7.2%, let's check if the fundamentals match the share price.

View our latest analysis for Photronics

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).

Over half a decade, Photronics managed to grow its earnings per share at 36% a year. The EPS growth is more impressive than the yearly share price gain of 16% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 10.59 also suggests market apprehension.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Photronics has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Photronics provided a TSR of 8.7% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Case in point: We've spotted 1 warning sign for Photronics you should be aware of.

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 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.