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Shareholders of Alliance Aviation Services (ASX:AQZ) Must Be Delighted With Their 727% Total Return

Simply Wall St
·3 mins read

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Alliance Aviation Services Limited (ASX:AQZ) share price has soared 608% over five years. And this is just one example of the epic gains achieved by some long term investors. On top of that, the share price is up 25% in about a quarter.

We love happy stories like this one. The company should be really proud of that performance!

See our latest analysis for Alliance Aviation 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 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.

During the last half decade, Alliance Aviation Services became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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 Alliance Aviation Services share price has gained 154% in three years. Meanwhile, EPS is up 4.7% per year. This EPS growth is lower than the 36% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

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

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on Alliance Aviation Services' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Alliance Aviation Services' total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Alliance Aviation Services' TSR of 727% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We're pleased to report that Alliance Aviation Services shareholders have received a total shareholder return of 46% over one year. However, the TSR over five years, coming in at 53% per year, is even more impressive. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Alliance Aviation Services , and understanding them should be part of your investment process.

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 AU exchanges.

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. 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.

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