The Cargojet (TSE:CJT) Share Price Has Gained 299%, So Why Not Pay It Some Attention?

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Cargojet Inc. (TSE:CJT) share price has soared 299% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 12% gain in the last three months.

View 1 warning sign we detected for Cargojet

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During the last half decade, Cargojet became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it’s worth taking a look at the returns in the last three years, too. We can see that the Cargojet share price is up 122% in the last three years. Meanwhile, EPS is up 105% per year. This EPS growth is higher than the 30% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. Having said that, the market is still optimistic, given the P/E ratio of 63.64.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

TSX:CJT Past and Future Earnings, January 11th 2020
TSX:CJT Past and Future Earnings, January 11th 2020

We know that Cargojet 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?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Cargojet, it has a TSR of 333% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s good to see that Cargojet has rewarded shareholders with a total shareholder return of 46% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 34%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It’s always interesting to track share price performance over the longer term. But to understand Cargojet better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for Cargojet (of which 1 is major) which any shareholder or potential investor should be aware of.

Of course Cargojet may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.