NV5 Global (NASDAQ:NVEE) investors are up 3.5% in the past week, but earnings have declined over the last five years

Simply Wall St · 10/15 11:34

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. But NV5 Global, Inc. (NASDAQ:NVEE) has fallen short of that second goal, with a share price rise of 30% over five years, which is below the market return. Zooming in, the stock is actually down 12% in the last year.

Since the stock has added US$52m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for NV5 Global

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, NV5 Global actually saw its EPS drop 4.8% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. 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 12% per year is probably viewed as evidence that NV5 Global is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
NasdaqGS:NVEE Earnings and Revenue Growth October 15th 2024

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

Investors in NV5 Global had a tough year, with a total loss of 12%, against a market gain of about 35%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for NV5 Global you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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