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It might be of some concern to shareholders to see the Acuity Brands, Inc. (NYSE:AYI) share price down 11% in the last month. But that doesn't change the fact that the returns over the last five years have been very strong. In fact, the share price is 221% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today.
The past week has proven to be lucrative for Acuity Brands investors, so let's see if fundamentals drove the company's five-year performance.
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 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.
Over half a decade, Acuity Brands managed to grow its earnings per share at 12% a year. This EPS growth is slower than the share price growth of 26% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Acuity Brands has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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 and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Acuity Brands the TSR over the last 5 years was 226%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Acuity Brands shareholders gained a total return of 3.7% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 27% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. If you would like to research Acuity Brands in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.