While shareholders of Zoom Communications (NASDAQ:ZM) are in the red over the last five years, underlying earnings have actually grown

The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Zoom Communications Inc. (NASDAQ:ZM), since the last five years saw the share price fall 45%. But it's up 6.4% in the last week. The buoyant market could have helped drive the share price pop, since stocks are up 4.8% in the same period.

On a more encouraging note the company has added US$1.4b to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

We check all companies for important risks. See what we found for Zoom Communications in our free report.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 unfortunate half decade during which the share price slipped, Zoom Communications actually saw its earnings per share (EPS) improve by 104% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

Revenue is actually up 20% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Zoom Communications is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Zoom Communications will earn in the future (free analyst consensus estimates)

A Different Perspective

It's good to see that Zoom Communications has rewarded shareholders with a total shareholder return of 23% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. If you would like to research Zoom Communications in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.