Plexus (NASDAQ:PLXS) shareholders notch a 16% CAGR over 5 years, yet earnings have been shrinking

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Plexus Corp. (NASDAQ:PLXS) shareholders would be well aware of this, since the stock is up 109% in five years. Also pleasing for shareholders was the 27% gain in the last three months. But this could be related to the strong market, which is up 13% in the last three months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Plexus

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...' 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 five years of share price growth, Plexus actually saw its EPS drop 4.3% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In contrast revenue growth of 6.7% per year is probably viewed as evidence that Plexus is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

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

If you are thinking of buying or selling Plexus stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Plexus provided a TSR of 15% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 16% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Plexus that you should be aware of before investing here.

Of course Plexus 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.

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