Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. Don't believe it? Then look at the Nanosonics Limited (ASX:NAN) share price. It's 535% higher than it was five years ago. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 11% in about a quarter.

We love happy stories like this one. The company should be really proud of that performance!

View our latest analysis for Nanosonics

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 the five years of share price growth, Nanosonics moved from a loss to profitability. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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. We can see that the Nanosonics share price is up 84% in the last three years. Meanwhile, EPS is up 374% per year. This EPS growth is higher than the 23% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Having said that, the market is still optimistic, given the P/E ratio of 137.08.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Nanosonics's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

It's good to see that Nanosonics has rewarded shareholders with a total shareholder return of 82% in the last twelve months. That gain is better than the annual TSR over five years, which is 45%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Nanosonics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.