IPG Photonics Corporation (NASDAQ:IPGP) shareholders might be concerned after seeing the share price drop 23% in the last quarter. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 138% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.
See our latest analysis for IPG Photonics
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
IPG Photonics' earnings per share are down 4.1% per year, despite strong share price performance over five years.
By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
In contrast revenue growth of 4.4% per year is probably viewed as evidence that IPG Photonics is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. This free report showing analyst forecasts should help you form a view on IPG Photonics
A Different Perspective
IPG Photonics provided a TSR of 34% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 19% per year over five year. This suggests the company might be improving over 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 instance, we've identified 2 warning signs for IPG Photonics that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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