When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of AppFolio, Inc. (NASDAQ:APPF) stock is up an impressive 137% over the last five years. Also pleasing for shareholders was the 14% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 8.7% in 90 days).

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.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

During the five years of share price growth, AppFolio moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that AppFolio 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.

A Different Perspective

It's good to see that AppFolio has rewarded shareholders with a total shareholder return of 47% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 19% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand AppFolio better, we need to consider many other factors. For instance, we've identified 1 warning sign for AppFolio 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 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.