The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For example, the MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) share price has soared 176% in the last three years. How nice for those who held the stock! In more good news, the share price has risen 20% in thirty days. We note that MACOM Technology Solutions Holdings reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
MACOM Technology Solutions Holdings became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of MACOM Technology Solutions Holdings' earnings, revenue and cash flow.
A Different Perspective
Although it hurts that MACOM Technology Solutions Holdings returned a loss of 9.6% in the last twelve months, the broader market was actually worse, returning a loss of 19%. Longer term investors wouldn't be so upset, since they would have made 16%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand MACOM Technology Solutions Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with MACOM Technology Solutions Holdings (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.
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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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.
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