MicroStrategy (NASDAQ:MSTR) pulls back 5.9% this week, but still delivers shareholders impressive 29% CAGR over 5 years

It might be of some concern to shareholders to see the MicroStrategy Incorporated (NASDAQ:MSTR) share price down 24% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 261% higher today. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend.

Although MicroStrategy has shed US$451m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for MicroStrategy

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.

During the last half decade, MicroStrategy became profitable. 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. 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. In fact, the MicroStrategy stock price is 21% lower in the last three years. Meanwhile, EPS is up 207% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -7% a year for three years.

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

We know that MicroStrategy has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We're pleased to report that MicroStrategy shareholders have received a total shareholder return of 87% over one year. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand MicroStrategy better, we need to consider many other factors. Even so, be aware that MicroStrategy is showing 5 warning signs in our investment analysis , and 3 of those make us uncomfortable...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.