Those who invested in Beacon Roofing Supply (NASDAQ:BECN) five years ago are up 137%
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 example, the Beacon Roofing Supply, Inc. (NASDAQ:BECN) share price has soared 137% in the last half decade. Most would be very happy with that. On top of that, the share price is up 10% in about a quarter. But this move may well have been assisted by the reasonably buoyant market (up 11% in 90 days).
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Beacon Roofing Supply
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Beacon Roofing Supply moved from a loss to profitability. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. So we might find other metrics can better explain the share price movements.
On the other hand, Beacon Roofing Supply's revenue is growing nicely, at a compound rate of 6.4% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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. This free report showing analyst forecasts should help you form a view on Beacon Roofing Supply
A Different Perspective
We're pleased to report that Beacon Roofing Supply shareholders have received a total shareholder return of 40% over one year. That gain is better than the annual TSR over five years, which is 19%. 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. 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. To that end, you should be aware of the 2 warning signs we've spotted with Beacon Roofing Supply .
Beacon Roofing Supply is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
