Yahoo Finance While shareholders of Vicor (NASDAQ:VICR) are in the black over 5 years, those who bought a week ago aren't so fortunate
We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Vicor Corporation (NASDAQ:VICR) share price. It's 937% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 21% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report. Anyone who held for that rewarding ride would probably be keen to talk about it.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
See our latest analysis for Vicor
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During the last half decade, Vicor became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Vicor share price is up 314% in the last three years. In the same period, EPS is up 26% per year. This EPS growth is lower than the 61% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized 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. It might be well worthwhile taking a look at our free report on Vicor's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Vicor has rewarded shareholders with a total shareholder return of 80% in the last twelve months. That's better than the annualised return of 60% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Vicor (of which 1 can't be ignored!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
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