Those who invested in Lumentum Holdings (NASDAQ:LITE) a year ago are up 75%

The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Lumentum Holdings Inc. (NASDAQ:LITE) share price is 75% higher than it was a year ago, much better than the market return of around 35% (not including dividends) in the same period. So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 19% lower than it was three years ago.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

See our latest analysis for Lumentum Holdings

Lumentum Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last year Lumentum Holdings saw its revenue shrink by 23%. The stock is up 75% in that time, a fine performance given the revenue drop. We can correlate the share price rise with revenue or profit growth, but it seems the market had previously expected weaker results, and sentiment around the stock is improving.

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

Lumentum Holdings is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Lumentum Holdings in this interactive graph of future profit estimates.

A Different Perspective

We're pleased to report that Lumentum Holdings shareholders have received a total shareholder return of 75% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Lumentum Holdings (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

But note: Lumentum Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.