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, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is Cadence Design Systems, Inc. (NASDAQ:CDNS) which saw its share price drive 216% higher over five years. Also pleasing for shareholders was the 16% gain in the last three months.

So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Over half a decade, Cadence Design Systems managed to grow its earnings per share at 1.8% a year. This EPS growth is slower than the share price growth of 26% per year, over the same period. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. And that’s hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 75.49.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Cadence Design Systems’ earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

Investors in Cadence Design Systems had a tough year, with a total loss of 8.4%, against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 26%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research Cadence Design Systems in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

But note: Cadence Design Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).