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 Microchip Technology Incorporated (NASDAQ:MCHP) stock is up an impressive 137% over the last five years. On top of that, the share price is up 25% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 18% in 90 days).
Check out our latest analysis for Microchip Technology
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…’ By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Microchip Technology managed to grow its earnings per share at 5.4% a year. This EPS growth is lower than the 19% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that’s hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
earnings-per-share-growth
We know that Microchip Technology has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Microchip Technology, it has a TSR of 162% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Microchip Technology’s TSR for the year was broadly in line with the market average, at 13%. It has to be noted that the recent return falls short of the 21% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Microchip Technology a stock worth watching. It’s always interesting to track share price performance over the longer term. But to understand Microchip Technology better, we need to consider many other factors. For instance, we’ve identified 4 warning signs for Microchip Technology (1 shouldn’t be ignored) that you should be aware of.
Of course Microchip Technology 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 US exchanges.
This article by Simply Wall St is general in nature. 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.
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