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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 AutoNation, Inc. (NYSE:AN) share price has soared 360% over five years. This just goes to show the value creation that some businesses can achieve. The last week saw the share price soften some 4.5%.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
See our latest analysis for AutoNation
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, AutoNation achieved compound earnings per share (EPS) growth of 29% per year. So the EPS growth rate is rather close to the annualized share price gain of 36% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into AutoNation's key metrics by checking this interactive graph of AutoNation's earnings, revenue and cash flow.
A Different Perspective
It's good to see that AutoNation has rewarded shareholders with a total shareholder return of 20% in the last twelve months. However, that falls short of the 36% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should learn about the 3 warning signs we've spotted with AutoNation (including 1 which is potentially serious) .
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.