Shareholders of Alliance Aviation Services (ASX:AQZ) Must Be Delighted With Their 649% Total Return

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Alliance Aviation Services Limited (ASX:AQZ) shares for the last five years, while they gained 541%. And this is just one example of the epic gains achieved by some long term investors. We note the stock price is up 1.2% in the last seven days.

It really delights us to see such great share price performance for investors.

Check out our latest analysis for Alliance Aviation Services

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 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 half decade, Alliance Aviation Services 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 Alliance Aviation Services share price has gained 134% in three years. During the same period, EPS grew by 4.7% each year. This EPS growth is lower than the 33% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Alliance Aviation Services' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Alliance Aviation Services' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Alliance Aviation Services' TSR of 649% 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 33% in the last twelve months. Having said that, the five-year TSR of 50% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Alliance Aviation Services you should know about.

We will like Alliance Aviation Services better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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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