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. Just think about the savvy investors who held Skyline Champion Corporation (NYSE:SKY) shares for the last five years, while they gained 408%. And this is just one example of the epic gains achieved by some long term investors. And in the last month, the share price has gained 24%.

Since the stock has added US$148m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Skyline Champion

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the five years of share price growth, Skyline Champion moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Skyline Champion share price is up 137% in the last three years. During the same period, EPS grew by 65% each year. This EPS growth is higher than the 33% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.

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 Skyline Champion has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Skyline Champion's financial health with this free report on its balance sheet.

A Different Perspective

It's nice to see that Skyline Champion shareholders have received a total shareholder return of 42% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 38% 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

We will like Skyline Champion better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.