Palo Alto Networks, Inc. (NASDAQ:PANW) shareholders might be concerned after seeing the share price drop 17% in the last month. But over five years returns have been remarkably great. In fact, during that period, the share price climbed 418%. Impressive! So we don't think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

While the stock has fallen 11% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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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 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, Palo Alto Networks became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

It is of course excellent to see how Palo Alto Networks has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Palo Alto Networks stock, you should check out this FREE detailed report on its balance sheet .

A Different Perspective

We're pleased to report that Palo Alto Networks shareholders have received a total shareholder return of 14% over one year. However, the TSR over five years, coming in at 39% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Palo Alto Networks better, we need to consider many other factors. Take risks, for example - Palo Alto Networks has 1 warning sign we think you should be aware of.

But note: Palo Alto Networks 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).

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.