Investing in MACOM Technology Solutions Holdings (NASDAQ:MTSI) five years ago would have delivered you a 436% gain

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. To wit, the MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) share price has soared 436% over five years. And this is just one example of the epic gains achieved by some long term investors. In more good news, the share price has risen 11% in thirty days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for MACOM Technology Solutions Holdings

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. 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.

During the last half decade, MACOM Technology Solutions Holdings became profitable. 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 MACOM Technology Solutions Holdings share price has gained 69% in three years. During the same period, EPS grew by 21% each year. That makes the EPS growth rather close to the annualized share price gain of 19% over the same period. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into MACOM Technology Solutions Holdings' key metrics by checking this interactive graph of MACOM Technology Solutions Holdings's earnings, revenue and cash flow.

A Different Perspective

It's good to see that MACOM Technology Solutions Holdings has rewarded shareholders with a total shareholder return of 47% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 40% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 1 warning sign for MACOM Technology Solutions Holdings that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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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.