New Zealand markets closed
  • NZX 50

    10,753.16
    -115.54 (-1.06%)
     
  • NZD/USD

    0.6168
    -0.0077 (-1.23%)
     
  • NZD/EUR

    0.5892
    -0.0061 (-1.02%)
     
  • ALL ORDS

    6,720.40
    -26.10 (-0.39%)
     
  • ASX 200

    6,539.90
    -28.20 (-0.43%)
     
  • OIL

    108.05
    +2.29 (+2.17%)
     
  • GOLD

    1,791.80
    -15.50 (-0.86%)
     
  • NASDAQ

    11,503.72
    -154.55 (-1.33%)
     
  • FTSE

    7,196.49
    +27.21 (+0.38%)
     
  • Dow Jones

    30,775.43
    -253.88 (-0.82%)
     
  • DAX

    12,831.10
    +47.33 (+0.37%)
     
  • Hang Seng

    21,859.79
    -137.10 (-0.62%)
     
  • NIKKEI 225

    25,935.62
    -457.42 (-1.73%)
     
  • NZD/JPY

    83.4630
    -1.2520 (-1.48%)
     

Those who invested in STAAR Surgical (NASDAQ:STAA) five years ago are up 538%

·3-min read

For many, the main point of investing in the stock market is to achieve spectacular returns. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held STAAR Surgical Company (NASDAQ:STAA) shares for the last five years, while they gained 538%. And this is just one example of the epic gains achieved by some long term investors. Meanwhile the share price is 2.5% higher than it was a week ago. We love happy stories like this one. The company should be really proud of that performance!

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for STAAR Surgical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last half decade, STAAR Surgical became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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 STAAR Surgical share price is up 142% in the last three years. In the same period, EPS is up 66% per year. This EPS growth is higher than the 34% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Of course, with a P/E ratio of 97.95, the market remains optimistic.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

We know that STAAR Surgical has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

While the broader market lost about 12% in the twelve months, STAAR Surgical shareholders did even worse, losing 53%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 45% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand STAAR Surgical better, we need to consider many other factors. Take risks, for example - STAAR Surgical has 1 warning sign we think you should be aware of.

Of course STAAR Surgical 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 US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting