Yahoo Finance QUALCOMM's (NASDAQ:QCOM) 20% CAGR outpaced the company's earnings growth over the same five-year period
QUALCOMM Incorporated (NASDAQ:QCOM) shareholders might be concerned after seeing the share price drop 18% in the last quarter. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 125% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.
The past week has proven to be lucrative for QUALCOMM investors, so let's see if fundamentals drove the company's five-year performance.
Check out our latest analysis for QUALCOMM
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, QUALCOMM achieved compound earnings per share (EPS) growth of 24% per year. This EPS growth is higher than the 18% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
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 QUALCOMM's key metrics by checking this interactive graph of QUALCOMM's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for QUALCOMM the TSR over the last 5 years was 152%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that QUALCOMM has rewarded shareholders with a total shareholder return of 64% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 20% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. If you would like to research QUALCOMM in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.
