If you want to compound wealth in the stock market, you can do so by buying an index fund. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the MarineMax, Inc. (NYSE:HZO) share price is up 75% in the last five years, slightly above the market return. It's also good to see that the stock is up 13% in a year.
While the stock has fallen 8.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
See our latest analysis for MarineMax
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, MarineMax managed to grow its earnings per share at 23% a year. This EPS growth is higher than the 12% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.30.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on MarineMax's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
MarineMax provided a TSR of 13% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 12% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Even so, be aware that MarineMax is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...
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.