Yahoo Finance Meta Platforms' (NASDAQ:META) 7.6% CAGR outpaced the company's earnings growth over the same five-year period
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. But Meta Platforms, Inc. (NASDAQ:META) has fallen short of that second goal, with a share price rise of 44% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 43% share price gain over twelve months.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
See our latest analysis for Meta Platforms
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 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.
Over half a decade, Meta Platforms managed to grow its earnings per share at 6.4% a year. So the EPS growth rate is rather close to the annualized share price gain of 8% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Meta Platforms' key metrics by checking this interactive graph of Meta Platforms's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Meta Platforms has rewarded shareholders with a total shareholder return of 43% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Take risks, for example - Meta Platforms has 2 warning signs we think you should be aware of.
Of course Meta Platforms 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 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.
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