Those who invested in the Nasdaq (NASDAQ: NDAQ) five years ago are up 193%
When you buy a stock, there is always a chance that it will drop by 100%. But on the bright side, you can earn well over 100% with a really good stock. For example, the price of Nasdaq, Inc. The stock (NASDAQ: NDAQ) has risen 168% over the past five years. It’s also good to see the share price rise 16% in the last quarter. This could be related to recent, recently released financial results – you can keep up to date with the most recent data by reading our corporate report.
Now, it’s worth looking at the fundamentals of the business as well, as this will help us determine whether the long-term return to shareholders matches the performance of the underlying business.
See our latest analysis for the Nasdaq
While the markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just the underlying performance of the company. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
In five years, the Nasdaq has managed to increase its earnings per share by 18% per year. The EPS growth rate is therefore quite close to the annualized gain in the share price of 22% per year. This indicates that investor sentiment towards the company has not changed much. On the contrary, the share price roughly followed the growth of BPA.
You can see how EPS has changed over time in the image below (click on the graph to see the exact values).
We know the Nasdaq has improved its results lately, but will it increase its revenue? Check if analysts believe the Nasdaq will increase revenue in the future.
What about dividends?
In addition to measuring stock price performance, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. It’s fair to say that the TSR gives a more complete picture of dividend paying stocks. In the case of the Nasdaq, it has a TSR of 193% for the past 5 years. This exceeds the return on its share price that we mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It’s nice to see that Nasdaq shareholders have received a total shareholder return of 47% over the past year. This includes the dividend. This gain is better than the annual TSR over five years, which is 24%. Therefore, it seems that sentiment around the company has been positive lately. At the best of times, this can portend real business momentum, meaning that now may be a good time to dig deep. I find it very interesting to look at the stock price over the long term as an indicator of company performance. But to really get an overview, we have to take other information into account as well. For example, we have identified 2 warning signs for the Nasdaq (1 is a little worrying) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the US stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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