The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. To wit, the Tetra Tech, Inc. (NASDAQ:TTEK) share price has flown 108% in the last three years. How nice for those who held the stock! The last week saw the share price soften some 2.4%.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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, Tetra Tech achieved compound earnings per share growth of 58% per year. The average annual share price increase of 28% is actually lower than the EPS growth. 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).
We know that Tetra Tech has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Tetra Tech’s balance sheet strength is a great place to start, if you want to investigate the stock further.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Tetra Tech, it has a TSR of 114% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s nice to see that Tetra Tech shareholders have received a total shareholder return of 14% over the last year. That’s including the dividend. However, the TSR over five years, coming in at 16% per year, is even more impressive. Before spending more time on Tetra Tech it might be wise to click here to see if insiders have been buying or selling shares.
We will like Tetra Tech better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 email@example.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.