Great Lakes Dredge & Dock (NASDAQ:GLDD) shareholders have earned a 29% CAGR over the last five years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) stock is up an impressive 255% over the last five years. In the last week the share price is up 2.0%.
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 Great Lakes Dredge & Dock
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years of share price growth, Great Lakes Dredge & Dock moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Great Lakes Dredge & Dock share price has gained 120% in three years. In the same period, EPS is up 131% per year. This EPS growth is higher than the 30% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Great Lakes Dredge & Dock has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Great Lakes Dredge & Dock provided a TSR of 20% over the year. That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 29% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Great Lakes Dredge & Dock a stock worth watching. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Great Lakes Dredge & Dock that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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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.
