Aramark (NYSE:ARMK) shareholders have seen the share price descend 21% over the month. But that doesn't change the reality that over twelve months the stock has done really well. To wit, it had solidly beat the market, up 14%.
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.
During the last year, Aramark actually saw its earnings per share drop 35%.
This means it's unlikely the market is judging the company based on earnings growth. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.
We are skeptical of the suggestion that the 1.3% dividend yield would entice buyers to the stock. Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. If you are thinking of buying or selling Aramark stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Aramark's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Aramark's TSR of 15% for the year exceeded its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Aramark shareholders have received a total shareholder return of 15% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 2.7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 3 warning signs for Aramark you should be aware of, and 1 of them shouldn't be ignored.
Aramark 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 US exchanges.
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