Semtech's (NASDAQ:SMTC) earnings growth rate lags the 7.6% CAGR delivered to shareholders

Published
July 02, 2022
NasdaqGS:SMTC
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Semtech Corporation (NASDAQ:SMTC) shareholders might be concerned after seeing the share price drop 23% in the last quarter. But the silver lining is the stock is up over five years. Unfortunately its return of 44% is below the market return of 66%.

Since the long term performance has been good but there's been a recent pullback of 9.4%, let's check if the fundamentals match the share price.

Check out our latest analysis for Semtech

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...' 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.

Over half a decade, Semtech managed to grow its earnings per share at 19% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

earnings-per-share-growth
NasdaqGS:SMTC Earnings Per Share Growth July 2nd 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Semtech's earnings, revenue and cash flow.

A Different Perspective

While the broader market lost about 20% in the twelve months, Semtech shareholders did even worse, losing 23%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 8%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Semtech , and understanding them should be part of your investment process.

Of course Semtech may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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