While Materialize (NASDAQ:MTLS) shareholders have been in the dark for 5 years, those who bought a week ago aren’t so lucky

While Materialize NV (NASDAQ:MTLS) shareholders are likely generally happy the stock hasn’t had a particularly good run recently, with the stock price dropping 20% ​​in the last quarter. But that doesn’t change the fact that shareholders have received very good returns over the past five years. We think most investors would be happy with the 119% return over this period. Generally speaking, long-term returns will give you a better idea of ​​the quality of the business than short-term ones. Of course, that doesn’t necessarily mean it’s cheap now. Unfortunately, not all shareholders will have held onto it for the long term, so spare a thought for those caught up in the 48% decline over the past twelve months.

Although the stock has fallen 13% this week, it is worth focusing on the long term and seeing if historical stock returns have been driven by underlying fundamentals.

See our latest review for Materialize

In his test The Graham-and-Doddsville super-investors Warren Buffett has described how stock prices don’t always rationally reflect a company’s value. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.

In five years of share price growth, Materialize has gone from loss to profitability. This type of transition can be an inflection point justifying a sharp rise in the stock price, as we have seen here. Since the company was not profitable five years ago, but not three years ago, it is also worth taking a look at the returns of the last three years. We can see that Materialize’s stock price is up 16% over the past three years. During the same period, EPS increased by 54% each year. This EPS growth is higher than the average annual share price increase of 5% over the same three years. Therefore, it seems that the market has moderated its growth expectations somewhat. Of course, with a P/E ratio of 71.88, the market remains optimistic.

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

It’s of course great to see how Materialize has grown its earnings over the years, but the future is more important to shareholders. If you are considering buying or selling Materialize stock, you should check out this FREE detailed report on its balance sheet.

A different perspective

Materialize shareholders are down 48% on the year, but the market itself is up 4.7%. Even good stock prices sometimes drop, but we want to see improvements in a company’s fundamentals before we get too interested. Longer-term investors wouldn’t be so upset, as they would have gained 17%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. For example, we found 2 warning signs for Materialize which you should be aware of before investing here.

If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.