Investors Who Bought Adacel Technologies (ASX:ADA) Shares A Year Ago Are Now Up 108%

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 Adacel Technologies Limited (ASX:ADA) share price has soared 108% in the last year. Most would be very happy with that, especially in just one year! We note the stock price is up 4.0% in the last seven days. In contrast, the longer term returns are negative, since the share price is 60% lower than it was three years ago.

See our latest analysis for Adacel Technologies

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year Adacel Technologies grew its earnings per share, moving from a loss to a profit.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We note that the most recent dividend payment is higher than the payment a year ago, so that may have assisted the share price. It could be that the company is reaching maturity and dividend investors are buying for the yield, pushing the price up in the process. Furthermore, the revenue growth of 8.7% probably also encouraged buyers.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Adacel Technologies will earn in the future (free profit forecasts).

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Adacel Technologies' TSR for the last year was 118%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Adacel Technologies shareholders have received a total shareholder return of 118% over one year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 8% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Adacel Technologies you should be aware of, and 1 of them is a bit unpleasant.

Adacel Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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