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IDEXX Laboratories, Inc. (NASDAQ:IDXX) shareholders have seen the share price descend 21% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 318% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, IDEXX Laboratories managed to grow its earnings per share at 30% a year. So the EPS growth rate is rather close to the annualized share price gain of 33% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how IDEXX Laboratories has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling IDEXX Laboratories stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
It's good to see that IDEXX Laboratories has rewarded shareholders with a total shareholder return of 7.0% in the last twelve months. However, that falls short of the 33% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. For instance, we've identified 3 warning signs for IDEXX Laboratories that you should be aware of.
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.
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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.