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. For example, the Lifeway Foods, Inc. (NASDAQ:LWAY) share price is up a whopping 907% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. It's also good to see the share price up 91% over the last quarter. It really delights us to see such great share price performance for investors.

Since it's been a strong week for Lifeway Foods shareholders, let's have a look at trend of the longer term fundamentals.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Lifeway Foods moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. 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. Indeed, the Lifeway Foods share price has gained 399% in three years. In the same period, EPS is up 55% per year. This EPS growth is lower than the 71% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

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

It is of course excellent to see how Lifeway Foods has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Lifeway Foods stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that Lifeway Foods has rewarded shareholders with a total shareholder return of 314% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 59% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Lifeway Foods better, we need to consider many other factors. For example, we've discovered 2 warning signs for Lifeway Foods that you should be aware of before investing here.

Of course Lifeway Foods 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 American 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.