When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. For example, the Photronics, Inc. (NASDAQ:PLAB) share price has soared 110% in the last half decade. Most would be very happy with that. Better yet, the share price has risen 4.3% in the last week. But this could be related to the buoyant market which is up about 2.6% in a week.

Since the stock has added US$61m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Photronics

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Photronics achieved compound earnings per share (EPS) growth of 36% per year. This EPS growth is higher than the 16% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.63 also suggests market apprehension.

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

We know that Photronics has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Photronics stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Photronics provided a TSR of 24% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade This suggests the company might be improving over time. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Photronics , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.