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Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right business to buy shares in, you can make more than you can lose. For example, the Tower Limited (NZSE:TWR) share price has soared 121% return in just a single year. Also pleasing for shareholders was the 10% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Also impressive, the stock is up 88% over three years, making long term shareholders happy, too.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Tower
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. 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.
Tower boasted truly magnificent EPS growth in the last year. We don't think the exact number is a good guide to the sustainable growth rate, but we do think this sort of increase is impressive. We are not surprised the share price is up. To us, inflection points like this are the best time to take a close look at a stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Tower has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Tower, it has a TSR of 129% for the last 1 year. 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
It's good to see that Tower has rewarded shareholders with a total shareholder return of 129% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 18% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Tower you should be aware of.