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Arko Corp. (NASDAQ:ARKO) shareholders will doubtless be very grateful to see the share price up 39% in the last quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 36%, which falls well short of the return you could get by buying an index fund.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Arko
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
While the share price declined over five years, Arko actually managed to increase EPS by an average of 380% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Because of the sharp contrast between the EPS growth rate and the share price growth, we're inclined to look to other metrics to understand the changing market sentiment around the stock.
The modest 1.9% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 23% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Arko has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Arko the TSR over the last 5 years was -34%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.