If You Had Bought Advanced Drainage Systems (NYSE:WMS) Shares Three Years Ago You'd Have Made 47%
Advanced Drainage Systems, Inc. (NYSE:WMS) shareholders have seen the share price descend 28% over the month. But over three years, the returns would have left most investors smiling To wit, the share price did better than an index fund, climbing 47% during that period.
Check out our latest analysis for Advanced Drainage Systems
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last three years, Advanced Drainage Systems failed to grow earnings per share, which fell 84% (annualized). In this instance, recent extraordinary items impacted the earnings.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 1.1%, we doubt the dividend is doing much to prop up the share price. It may well be that Advanced Drainage Systems revenue growth rate of 6.6% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The graphic below depicts how earnings and revenue have 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. If you are thinking of buying or selling Advanced Drainage Systems stock, you should check out this free report showing analyst profit forecasts.
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. As it happens, Advanced Drainage Systems's TSR for the last 3 years was 58%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Advanced Drainage Systems shareholders have received a total shareholder return of 21% over the last year. Of course, that includes the dividend. That's better than the annualised return of 3.5% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Advanced Drainage Systems better, we need to consider many other factors. Take risks, for example - Advanced Drainage Systems has 2 warning signs we think you should be aware of.
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
