Alliance Aviation Services (ASX:AQZ) Has Rewarded Shareholders With An Exceptional 917% Total Return On Their Investment

Long term investing can be life changing when you buy and hold the truly great businesses. And we've seen some truly amazing gains over the years. Just think about the savvy investors who held Alliance Aviation Services Limited (ASX:AQZ) shares for the last five years, while they gained 771%. And this is just one example of the epic gains achieved by some long term investors. It's down 1.4% in the last seven days.

Anyone who held for that rewarding ride would probably be keen to talk about it.

Check out our latest analysis for Alliance Aviation Services

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.

During the last half decade, Alliance Aviation Services became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. 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 Alliance Aviation Services share price is up 144% in the last three years. In the same period, EPS is up 19% per year. This EPS growth is lower than the 35% 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 image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Alliance Aviation Services has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Alliance Aviation Services will grow revenue in the future.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Alliance Aviation Services' total shareholder return (TSR) and its 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. Alliance Aviation Services' TSR of 917% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

It's good to see that Alliance Aviation Services has rewarded shareholders with a total shareholder return of 126% in the last twelve months. That's better than the annualised return of 59% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Alliance Aviation Services better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Alliance Aviation Services (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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