<!-- HTML_TAG_START -->NasdaqGS:CRAI Earnings and Revenue Growth December 22nd 2024<!-- HTML_TAG_END -->
For many, the main point of investing in the stock market is to achieve spectacular returns. And we’ve seen some truly amazing gains over the years. Don’t believe it? Then look at the RCM Technologies, Inc. (NASDAQ:RCMT) share price. It’s 638% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. It’s down 1.3% in the last seven days. Anyone who held for that rewarding ride would probably be keen to talk about it.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for RCM Technologies
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 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, RCM Technologies managed to grow its earnings per share at 49% a year. This EPS growth is remarkably close to the 49% average annual increase in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. 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 RCM Technologies has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at RCM Technologies’ financial health with this free report on its balance sheet.
Investors in RCM Technologies had a tough year, with a total loss of 26%, against a market gain of about 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 49% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for RCM Technologies (of which 2 make us uncomfortable!) you should know about.
