If You Had Bought Air Canada (TSE:AC) Shares Five Years Ago You'd Have Made 303%

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 Air Canada (TSE:AC) shares for the last five years, while they gained 303%. This just goes to show the value creation that some businesses can achieve. On the other hand, the stock price has retraced 6.0% in the last week.

See our latest analysis for Air Canada

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Air Canada achieved compound earnings per share (EPS) growth of 43% per year. The EPS growth is more impressive than the yearly share price gain of 32% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.97.

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

We know that Air Canada has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

A Different Perspective

It's nice to see that Air Canada shareholders have received a total shareholder return of 71% over the last year. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - Air Canada has 1 warning sign we think you should be aware of.

But note: Air Canada may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.