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Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Palo Alto Networks, Inc. (NASDAQ:PANW) shares for the last five years, while they gained 427%. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 23%. But this could be related to good market conditions -- stocks in its market are up 12% in the last month.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last half decade, Palo Alto Networks 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.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Palo Alto Networks has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Palo Alto Networks stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
We're pleased to report that Palo Alto Networks shareholders have received a total shareholder return of 23% over one year. However, that falls short of the 39% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Palo Alto Networks better, we need to consider many other factors. Take risks, for example - Palo Alto Networks has 1 warning sign we think you should be aware of.
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).