Advanced Micro Devices ( NASDAQ:AMD ) stock has performed better than its underlying earnings growth over the last five years

Buying shares in top companies can build significant wealth for you and your family. Although the best companies are difficult to find, but they can generate huge profits over long periods. You don’t believe it? Then look at Advanced Micro Devices, Inc. (NASDAQ:AMD) stock price. This is 467% more than five years ago. If that doesn’t get you thinking about long-term investing, we don’t know what will. And in the last month, the share price is up 12%. However, this may be related to the good market situation – the company’s shares increased by 7.3% over the last month.

Based on this solid 7-day performance, let’s examine what role the company’s fundamentals have played in delivering long-term shareholder returns.

Check out our latest analysis for Advanced Micro Devices

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a sense of how investor attitudes towards a company have changed over time.

Over half a decade, Advanced Micro Devices has managed to grow earnings per share by 21% annually. This EPS growth is lower than the average annual share price gain of 41%. Therefore, it can be assumed that the market has a better opinion of the company than five years ago. This isn’t necessarily surprising given its five-year track record of earnings growth. This optimism is visible in the relatively high P/E ratio of 238.48.

The graphic below shows how EPS has changed over time (you can see the exact values ​​by clicking on the image).

We know Advanced Micro Devices has recently improved its financial results, but will it grow revenues? You could check that free a report showing analyst revenue forecasts.

Another perspective

It’s good to see that Advanced Micro Devices shareholders have received a total shareholder return of 52% over the last year. This gain is better than the annualized TSR over five years, which is 41%. So it looks like the sentiment around the company has been positive lately. An optimistic person might view the recent improvement in TSR as a sign that the business itself is getting better over time. It’s always interesting to track share price performance over the long term. However, to better understand advanced microdevices, we need to consider many other factors. Still, be aware that it displays Advanced Micro Devices 1 warning sign in our investment analysis you should know about…

If you like to buy stocks with management, you might like this free list of companies. (Hint: many of them go unnoticed AND are attractively priced).

The story continues

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have an opinion on this article? Worried about content? contact with us directly. Alternatively, email the editorial team (at) simplywallst.com.

This article by Simply Wall St is of a general nature. We comment based on historical data and analyst forecasts, using only an unbiased methodology, and our articles are not intended to provide financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative content. Simply Wall St has no position in any of the stocks mentioned.