MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) shareholders might be concerned after seeing the share price drop 12% in the last week. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 314% in that time. So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price.

Although MACOM Technology Solutions Holdings has shed US$979m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the last half decade, MACOM Technology Solutions Holdings became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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 MACOM Technology Solutions Holdings share price is up 50% in the last three years. In the same period, EPS is up 21% per year. This EPS growth is higher than the 14% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Of course, with a P/E ratio of 96.06, the market remains optimistic.

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

It might be well worthwhile taking a look at our free report on MACOM Technology Solutions Holdings' earnings, revenue and cash flow.

A Different Perspective

MACOM Technology Solutions Holdings shareholders have received returns of 21% over twelve months, which isn't far from the general market return. We should note here that the five-year TSR is more impressive, at 33% per year. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes MACOM Technology Solutions Holdings a stock worth watching. 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 risks, for instance. Every company has them, and we've spotted 1 warning sign for MACOM Technology Solutions Holdings you should know about.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are 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.