Those who invested in Acrow Formwork and Construction Services (ASX:ACF) five years ago are up 283%

When you buy a stock there is always a possibility that it could drop 100%. 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 Acrow Formwork and Construction Services Limited (ASX:ACF) stock is up an impressive 225% over the last five years. On top of that, the share price is up 12% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

View our latest analysis for Acrow Formwork and Construction Services

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, Acrow Formwork and Construction Services became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Acrow Formwork and Construction Services share price has gained 100% in three years. Meanwhile, EPS is up 29% per year. This EPS growth is reasonably close to the 26% average annual increase in the share price (over three years, again). That suggests that the market sentiment around the company hasn't changed much over that time. There's a strong correlation between the share price and EPS.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Acrow Formwork and Construction Services' earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Acrow Formwork and Construction Services, it has a TSR of 283% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Acrow Formwork and Construction Services has rewarded shareholders with a total shareholder return of 30% in the last twelve months. That's including the dividend. However, the TSR over five years, coming in at 31% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Acrow Formwork and Construction Services better, we need to consider many other factors. Even so, be aware that Acrow Formwork and Construction Services is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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