We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. For example, the Nova Ltd. (NASDAQ:NVMI) share price is up a whopping 746% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. And in the last month, the share price has gained 15%. We note that Nova reported its financial results recently; luckily, you can catch up on the latest revenue and profit numbers in our company report. Anyone who held for that rewarding ride would probably be keen to talk about it.
Since the stock has added US$302m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Nova managed to grow its earnings per share at 28% a year. This EPS growth is slower than the share price growth of 53% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Nova has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
We're pleased to report that Nova shareholders have received a total shareholder return of 93% over one year. That gain is better than the annual TSR over five years, which is 53%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before forming an opinion on Nova you might want to consider these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of undervalued small caps 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.
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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.