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Alphabet (NASDAQ:GOOG.L) shareholders have earned a 28% CAGR over the last five years

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·2-min read
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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 instance, the price of Alphabet Inc. (NASDAQ:GOOG.L) stock is up an impressive 246% over the last five years. Also pleasing for shareholders was the 17% gain in the last three months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Alphabet

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. 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, Alphabet managed to grow its earnings per share at 29% a year. This EPS growth is remarkably close to the 28% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

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

earnings-per-share-growth
earnings-per-share-growth

It is of course excellent to see how Alphabet has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Alphabet stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Alphabet has rewarded shareholders with a total shareholder return of 94% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 28% 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. Is Alphabet cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Alphabet may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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. 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.

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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