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Shareholders Are Thrilled That The Armstrong World Industries (NYSE:AWI) Share Price Increased 133%

Simply Wall St

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Armstrong World Industries, Inc. (NYSE:AWI) share price has flown 133% in the last three years. That sort of return is as solid as granite. It's down 1.5% in the last seven days.

See our latest analysis for Armstrong World Industries

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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Armstrong World Industries achieved compound earnings per share growth of 145% per year. This EPS growth is higher than the 32% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:AWI Past and Future Earnings, September 29th 2019

We know that Armstrong World Industries has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Armstrong World Industries's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Armstrong World Industries, it has a TSR of 135% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Armstrong World Industries shareholders have received a total shareholder return of 39% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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. Thank you for reading.