The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Blu Label Unlimited Group Limited (JSE:BLU) which saw its share price drive 257% higher over five years. It’s even up 6.4% in the last week.

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

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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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, Blu Label Unlimited Group achieved compound earnings per share (EPS) growth of 61% per year. The EPS growth is more impressive than the yearly share price gain of 29% over the same period. So it seems the market isn’t so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.78.

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

This free interactive report on Blu Label Unlimited Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

It’s nice to see that Blu Label Unlimited Group shareholders have received a total shareholder return of 162% over the last year. That’s better than the annualised return of 29% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Blu Label Unlimited Group (of which 2 can’t be ignored!) you should know about.

Of course Blu Label Unlimited Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on South African 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.