Long-term investing can be life-changing when you buy and hold a truly great business. And the highest quality companies can see their stock prices rise significantly. In other words, Advanced Micro Devices Company (NASDAQ:AMD) stock has soared 790% in five years. This is just one example of the spectacular gains some long-term investors have achieved. It's also good to see that the stock price is up 61% quarter-over-quarter. If you've enjoyed this rewarding ride, you'll probably want to talk about it.
It's also worth looking at the company's fundamentals here. That's because it helps determine whether long-term shareholder returns are consistent with the performance of the underlying business.
Check out our latest analysis for Advanced Micro Devices.
in his essay Graham & Doddsville SuperInvestors Warren Buffett has said that stock prices do not always rationally reflect the value of a company. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
Over five years, Advanced Micro Devices was able to grow its earnings per share at 9.0% per year. This EPS growth rate is lower than the average annual increase in the share price of 55%. This suggests that market participants have been valuing the company highly recently. This isn't necessarily surprising, given its track record of profit growth over the past five years. This optimism is reflected in its fairly high P/E ratio of 392.39.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Learn more about Advanced Micro Devices' key metrics by checking this interactive graph of Advanced Micro Devices' earnings, revenue and cash flow.
different perspective
It's good to see that Advanced Micro Devices delivered shareholder returns of 151% over the last twelve months. The 1-year TSR is better than his 5-year TSR (the latter at 55% per annum), so it looks like the stock has been performing better recently. Optimists might think that the recent improvement in TSR indicates that the business itself is improving over time. I think it's very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. For example, taking risks – Advanced Micro Devices two warning signs I think you should know.
If you want to check out another company with potentially better financials, don't miss this free A list of companies that have proven they can grow revenue.
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 using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
