Long term investing can be life changing when you buy and hold the truly great businesses. While not every stock performs well, when investors win, they can win big. To wit, the AudioCodes Ltd. (NASDAQ:AUDC) share price has soared 725% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 17% gain in the last three months.
We love happy stories like this one. The company should be really proud of that performance!
View our latest analysis for AudioCodes
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, AudioCodes managed to grow its earnings per share at 137% a year. This EPS growth is higher than the 53% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how AudioCodes has grown profits over the years, but the future is more important for shareholders. This free interactive report on AudioCodes' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, AudioCodes' TSR for the last 5 years was 768%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
AudioCodes provided a TSR of 7.1% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 54% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before deciding if you like the current share price, check how AudioCodes scores on these 3 valuation metrics.
We will like AudioCodes better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.