When we say long-term investments, we think of transactions with lower risk in the long run and earnings higher than savings or rent, but with no extraordinary profits. Still, we keep hoping to run into some stock that will make us spectacular returns. Sometimes, this happens with already established highest quality companies, like PayPal Holdings, Inc. (NASDAQ: PYPL) whose share price has increased incredible 569% over the last five years.
To additionally spice this ride, the stock started this year at around USD $232, and the current trading price is USD $289, which represents a gain of almost 25%. Over the past decade, there have been several great opportunities with high gains like this. Some of the examples are Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), along with many more.
Is This Gain A True Increase In Value Of The Company?
It is common knowledge that the share price does not necessarily reflect the value of the company. Warren Buffett explained this in his essay "The Superinvestors of Graham-and-Doddsville". PayPal, the largest platform for money transfer services, is a good example. The company's annual average increase in the share price was 46%, while the achieved average growth of the company's earnings per share was 29%. Therefore, we must conclude that the …