Buying shares in the best businesses can build meaningful wealth for you and your family. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held Adobe Inc. (NASDAQ:ADBE) shares for the last five years, while they gained 466%. This just goes to show the value creation that some businesses can achieve. Also pleasing for shareholders was the 22% gain in the last three months.

Check out our latest analysis for Adobe

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Adobe achieved compound earnings per share (EPS) growth of 49% per year. So the EPS growth rate is rather close to the annualized share price gain of 41% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.

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

We know that Adobe has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Adobe's balance sheet strength is a great place to start, if you want to investigate the stock further.

A Different Perspective

Adobe provided a TSR of 33% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 41% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Adobe , and understanding them should be part of your investment process.

We will like Adobe better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.

This article by Simply Wall St is general in nature. 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.

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