Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Don't believe it? Then look at the SPX Technologies, Inc. (NYSE:SPXC) share price. It's 323% higher than it was five years ago. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 26% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
The past week has proven to be lucrative for SPX Technologies investors, so let's see if fundamentals drove the company's five-year performance.
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, SPX Technologies managed to grow its earnings per share at 17% a year. This EPS growth is slower than the share price growth of 33% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that SPX Technologies has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It's nice to see that SPX Technologies shareholders have received a total shareholder return of 82% over the last year. That gain is better than the annual TSR over five years, which is 33%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 instance, we've identified 2 warning signs for SPX Technologies that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.