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 the bright side, you can make far more than 100% on a really good stock. For example, the Light & Wonder, Inc. (NASDAQ:LNW) share price has soared 279% in the last half decade. Most would be very happy with that. We note the stock price is up 1.9% in the last seven days.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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 last half decade, Light & Wonder became profitable. 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.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Light & Wonder has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

Light & Wonder shareholders are up 31% for the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 31% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Light & Wonder better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Light & Wonder you should be aware of, and 1 of them can't be ignored.

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.