ABM Industries (NYSE:ABM) shareholders have earned a 9.2% CAGR over the last five years
The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But ABM Industries Incorporated (NYSE:ABM) has fallen short of that second goal, with a share price rise of 41% over five years, which is below the market return. Zooming in, the stock is actually down 4.4% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for ABM Industries
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, ABM Industries managed to grow its earnings per share at 14% a year. The EPS growth is more impressive than the yearly share price gain of 7% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of ABM Industries' earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, ABM Industries' TSR for the last 5 years was 56%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
ABM Industries shareholders are down 2.6% for the year (even including dividends), but the market itself is up 3.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand ABM Industries better, we need to consider many other factors. For instance, we've identified 2 warning signs for ABM Industries (1 makes us a bit uncomfortable) that you should be aware of.
ABM Industries is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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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