Unfortunately, investing is risky - companies can and do go bankrupt. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Alliance Data Systems Corporation (NYSE:ADS) share price had more than doubled in just one year - up 123%. On top of that, the share price is up 52% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report. Unfortunately the longer term returns are not so good, with the stock falling 52% in the last three years.

See our latest analysis for Alliance Data Systems

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over the last twelve months, Alliance Data Systems actually shrank its EPS by 45%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We are skeptical of the suggestion that the 0.8% dividend yield would entice buyers to the stock. Alliance Data Systems' revenue actually dropped 19% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Alliance Data Systems in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Alliance Data Systems the TSR over the last year was 127%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Alliance Data Systems has rewarded shareholders with a total shareholder return of 127% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 8% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Alliance Data Systems better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Alliance Data Systems you should be aware of, and 1 of them can't be ignored.