Zebra Technologies (NASDAQ:ZBRA) shareholders have earned a 14% CAGR over the last five years

If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Zebra Technologies Corporation (NASDAQ:ZBRA) share price is up 94% in the last five years, slightly above the market return. It's fair to say the stock has continued its long term trend in the last year, over which it has risen 25%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Zebra Technologies

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 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.

Zebra Technologies' earnings per share are down 8.6% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.

On the other hand, Zebra Technologies' revenue is growing nicely, at a compound rate of 4.3% over the last five years. 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).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Zebra Technologies provided a TSR of 25% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 14% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Take risks, for example - Zebra Technologies has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

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.