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 Wayfair Inc. (NYSE:W) shares for the last five years, while they gained 434%. And this is just one example of the epic gains achieved by some long term investors. It's also up 27% in about a month.
Wayfair wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Wayfair saw its revenue grow at 35% per year. Even measured against other revenue-focussed companies, that's a good result. Arguably, this is well and truly reflected in the strong share price gain of 40%(per year) over the same period. It's never too late to start following a top notch stock like Wayfair, since some long term winners go on winning for decades. So we'd recommend you take a closer look at this one, but keep in mind the market seems optimistic.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Wayfair in this interactive graph of future profit estimates.
A Different Perspective
Wayfair shareholders are up 9.8% for the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 40% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Wayfair , and understanding them should be part of your investment process.
Wayfair is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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