PTC's (NASDAQ:PTC) investors will be pleased with their stellar 155% return over the last five years

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For example, the PTC Inc. (NASDAQ:PTC) share price has soared 155% in the last half decade. Most would be very happy with that. Meanwhile the share price is 2.6% higher than it was a week ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for PTC

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the five years of share price growth, PTC 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 PTC share price has gained 43% in three years. In the same period, EPS is up 6.5% per year. This EPS growth is lower than the 13% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

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

Dive deeper into PTC's key metrics by checking this interactive graph of PTC's earnings, revenue and cash flow.

A Different Perspective

PTC shareholders gained a total return of 20% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 21% over 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 PTC better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with PTC , and understanding them should be part of your investment process.

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.