Yahoo Finance Lumentum Holdings (NASDAQ:LITE) shareholders YoY returns are lagging the company's 27% three-year earnings growth
Lumentum Holdings Inc. (NASDAQ:LITE) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn't change the fact that the returns over the last three years have been pleasing. In fact, the company's share price bested the return of its market index in that time, posting a gain of 51%.
In light of the stock dropping 5.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
View our latest analysis for Lumentum Holdings
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. 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).
During three years of share price growth, Lumentum Holdings achieved compound earnings per share growth of 107% per year. The average annual share price increase of 15% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Lumentum Holdings has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
A Different Perspective
While it's certainly disappointing to see that Lumentum Holdings shares lost 6.8% throughout the year, that wasn't as bad as the market loss of 20%. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Lumentum Holdings that you should be aware of before investing here.
We will like Lumentum Holdings better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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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.
