Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Just think about the savvy investors who held MakeMyTrip Limited (NASDAQ:MMYT) shares for the last five years, while they gained 342%. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 11% over the last quarter.
While the stock has fallen 4.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years of share price growth, MakeMyTrip 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.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how MakeMyTrip has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling MakeMyTrip stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that MakeMyTrip shareholders have received a total shareholder return of 137% over one year. That's better than the annualised return of 35% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for MakeMyTrip that you should be aware of before investing here.
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.
