In This Article:
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of AECOM (NYSE:ACM) stock is up an impressive 178% over the last five years. In the last week the share price is up 4.4%.
Since the stock has added US$553m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
We check all companies for important risks. See what we found for AECOM in our free report.
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, AECOM managed to grow its earnings per share at 27% a year. This EPS growth is reasonably close to the 23% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that AECOM has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of AECOM, it has a TSR of 187% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
AECOM shareholders gained a total return of 7.4% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 23% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Before spending more time on AECOM it might be wise to click here to see if insiders have been buying or selling shares.