While shareholders of Agilysys (NASDAQ:AGYS) are in the black over 5 years, those who bought a week ago aren't so fortunate

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the Agilysys, Inc. (NASDAQ:AGYS) share price has soared 510% over five years. This just goes to show the value creation that some businesses can achieve. It's also good to see the share price up 64% over the last quarter. It really delights us to see such great share price performance for investors.

Since the long term performance has been good but there's been a recent pullback of 3.7%, let's check if the fundamentals match the share price.

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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 five years of share price growth, Agilysys moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Agilysys share price has gained 124% in three years. Meanwhile, EPS is up 64% per year. This EPS growth is higher than the 31% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Having said that, the market is still optimistic, given the P/E ratio of 135.02.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Agilysys' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Agilysys provided a TSR of 3.6% 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 44% 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. It's always interesting to track share price performance over the longer term. But to understand Agilysys better, we need to consider many other factors. Even so, be aware that Agilysys is showing 1 warning sign in our investment analysis , you should know about...

Of course Agilysys 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 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.