Investors in Gartner (NYSE:IT) have seen strong returns of 174% over the past five years

When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of Gartner, Inc. (NYSE:IT) stock is up an impressive 174% over the last five years. In the last week the share price is up 1.5%.

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 Gartner

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Gartner achieved compound earnings per share (EPS) growth of 42% per year. This EPS growth is higher than the 22% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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

It is of course excellent to see how Gartner has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Gartner's financial health with this free report on its balance sheet.

A Different Perspective

Gartner provided a TSR of 24% over the year. That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 22% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. It's always interesting to track share price performance over the longer term. But to understand Gartner 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 Gartner , and understanding them should be part of your investment process.

We will like Gartner better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.

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