For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held AB Dynamics plc (LON:ABDP) shares for the last five years, while they gained 853%. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 20% in about a quarter.
It really delights us to see such great share price performance for investors.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, AB Dynamics managed to grow its earnings per share at 13% a year. This EPS growth is slower than the share price growth of 57% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 67.49.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on AB Dynamics' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between AB Dynamics' total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for AB Dynamics shareholders, and that cash payout contributed to why its TSR of 873%, over the last 5 years, is better than the share price return.
A Different Perspective
While the broader market lost about 9.2% in the twelve months, AB Dynamics shareholders did even worse, losing 21%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 58% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Case in point: We've spotted 1 warning sign for AB Dynamics you should be aware of.
AB Dynamics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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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