Investors in AeroVironment (NASDAQ:AVAV) have made a impressive return of 137% over the past five years




  • In Business
  • 2022-08-10 11:42:11Z
  • By Simply Wall St.
 

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is AeroVironment, Inc. (NASDAQ:AVAV) which saw its share price drive 137% higher over five years. It's also good to see the share price up 20% over the last quarter.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for AeroVironment

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, AeroVironment actually saw its EPS drop 22% per year.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

In contrast revenue growth of 13% per year is probably viewed as evidence that AeroVironment is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

We regret to report that AeroVironment shareholders are down 14% for the year. Unfortunately, that's worse than the broader market decline of 12%. 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. Longer term investors wouldn't be so upset, since they would have made 19%, each year, over five years. 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. For example, we've discovered 1 warning sign for AeroVironment that you should be aware of before investing here.

Of course AeroVironment 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.

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

COMMENTS

More Related News

The past five years for Estia Health (ASX:EHE) investors has not been profitable
The past five years for Estia Health (ASX:EHE) investors has not been profitable

For many, the main point of investing is to generate higher returns than the overall market. But every investor is...

We
We're Interested To See How Frontier Energy (ASX:FHE) Uses Its Cash Hoard To Grow

Just because a business does not make any money, does not mean that the stock will go down. For example, although...

VeriSign
VeriSign's (NASDAQ:VRSN) investors will be pleased with their favorable 63% return over the last five years

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make...

Earnings growth of 2.8% over 1 year hasn
Earnings growth of 2.8% over 1 year hasn't been enough to translate into positive returns for Lufax Holding (NYSE:LU) shareholders

Even the best stock pickers will make plenty of bad investments. And unfortunately for Lufax Holding Ltd ( NYSE:LU...

Atlanticus Holdings (NASDAQ:ATLC) pulls back 17% this week, but still delivers shareholders enviable 60% CAGR over 5 years
Atlanticus Holdings (NASDAQ:ATLC) pulls back 17% this week, but still delivers shareholders enviable 60% CAGR over 5 years

The last three months have been tough on Atlanticus Holdings Corporation ( NASDAQ:ATLC ) shareholders, who have seen...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business