It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But if you buy shares in a really great company, you can more than double your money. For example, the Alpha FX Group plc (LON:AFX) share price has soared 162% in the last three years. That sort of return is as solid as granite. Meanwhile the share price is 2.6% higher than it was a week ago.
Check out our latest analysis for Alpha FX Group
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 three years of share price growth, Alpha FX Group achieved compound earnings per share growth of 22% per year. In comparison, the 38% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 53.73.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Alpha FX Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Alpha FX Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Alpha FX Group shareholders, and that cash payout contributed to why its TSR of 167%, over the last 3 years, is better than the share price return.
A Different Perspective
We're pleased to report that Alpha FX Group rewarded shareholders with a total shareholder return of 66% over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 39%. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Alpha FX Group has 1 warning sign we think you should be aware of.