Cleanaway Waste Management (ASX:CWY) Has Gifted Shareholders With A Fantastic 291% Total Return On Their Investment

By
Simply Wall St
Published
November 22, 2020
ASX:CWY

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. One great example is Cleanaway Waste Management Limited (ASX:CWY) which saw its share price drive 253% higher over five years.

See our latest analysis for Cleanaway Waste Management

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 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.

During the last half decade, Cleanaway Waste Management became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the Cleanaway Waste Management share price has gained 57% in three years. During the same period, EPS grew by 7.6% each year. This EPS growth is lower than the 16% average annual increase in the share price over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

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

earnings-per-share-growth
ASX:CWY Earnings Per Share Growth November 22nd 2020

Dive deeper into Cleanaway Waste Management's key metrics by checking this interactive graph of Cleanaway Waste Management's earnings, revenue and cash flow.

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. In the case of Cleanaway Waste Management, it has a TSR of 291% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Cleanaway Waste Management has rewarded shareholders with a total shareholder return of 23% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 31% per year, is even more impressive. It's always interesting to track share price performance over the longer term. But to understand Cleanaway Waste Management better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Cleanaway Waste Management , and understanding them should be part of your investment process.

Of course Cleanaway Waste Management 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 AU exchanges.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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