Does Sanmina's (NASDAQ:SANM) Share Price Gain of 66% Match Its Business Performance?

By
Simply Wall St
Published
February 22, 2021
NasdaqGS:SANM
Source: Shutterstock

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Sanmina Corporation (NASDAQ:SANM) share price is up 66% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 16% in the last year.

View our latest analysis for Sanmina

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, Sanmina moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:SANM Earnings Per Share Growth February 22nd 2021

It is of course excellent to see how Sanmina has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

Sanmina shareholders gained a total return of 16% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 11% per year over five year. This suggests the company might be improving over time. 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 instance, we've identified 1 warning sign for Sanmina that you should be aware of.

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 US exchanges.

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