We think all investors should try to buy and hold high quality multi-year winners. And highest quality companies can see their share prices grow by huge amounts. For example, the Cadence Design Systems, Inc. (NASDAQ:CDNS) share price is up a whopping 365% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. On top of that, the share price is up 20% in about a quarter. But this could be related to the strong market, which is up 11% in the last three months.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Cadence Design Systems

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Over half a decade, Cadence Design Systems managed to grow its earnings per share at 19% a year. This EPS growth is slower than the share price growth of 36% 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. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 80.97.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Cadence Design Systems' earnings, revenue and cash flow.

A Different Perspective

Cadence Design Systems shareholders gained a total return of 16% during the year. Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 36% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on Cadence Design Systems it might be wise to click here to see if insiders have been buying or selling shares.

We will like Cadence Design Systems better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider 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.