When you buy shares in a company, there is always a risk that the price drops to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the ARC Document Solutions, Inc. (NYSE:ARC) share price has soared 243% in the last 1 year. Most would be very happy with that, especially in just one year! On top of that, the share price is up 55% in about a quarter. However, the stock hasn't done so well in the longer term, with the stock only up 12% in three years.
Since it's been a strong week for ARC Document Solutions shareholders, let's have a look at trend of the longer term fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 last year ARC Document Solutions grew its earnings per share (EPS) by 90%. This EPS growth is significantly lower than the 243% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ARC Document Solutions' TSR for the last 1 year was 251%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that ARC Document Solutions shareholders have received a total shareholder return of 251% over one year. And that does include the dividend. That certainly beats the loss of about 0.6% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand ARC Document Solutions better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for ARC Document Solutions you should know about.
But note: ARC Document Solutions may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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